Here are two more stocks with very substantial tailwinds behind them; one a more domestic Australia-New Zealand situation, riding a technology change in its market; and one a global business – one of the ASX’s true global leaders, in fact, but a status that is not widely known.
Both companies are at the heart of transforming how their respective industries do things, and their growth prospects look very attractive.
- oOH Media (OML, $1.755)
Market capitalisation: $946 million
12-month total return: 8.7%
3-year total return: 2.4% a year
FY25 estimated yield: 3.9%, fully franked (grossed-up, 5.5%)
FY25 estimated price/earnings (P/E) ratio: 13.7 times earnings
Analysts’ consensus target price: $1.85 (Stock Doctor/Refinitiv, 12 analysts)
Although it boasts one of the worst names on the ASX (in my opinion) oOh! Media is a very impressive growth story. OML works in the field of ‘out-of-home’ advertising (that’s the bad pun acronym in ‘oOh!’), which means any advertising that the consumer experiences outside the home – think billboards, posters, and these days, digital screens. OML has a network of more than 37,000 digital and static asset locations, including roadsides, retail centres, airports, train stations, bus stops, office towers and universities. The company segments its operations in Road, Street & Rail, Retail, Fly, and City & Youth.
The out-of-home advertising sector is growing strongly, with growth in 2023 of 15%, the fastest rate of all media, says OML. The sector’s share of total media spend has hit a record 14.5%, with much of its growth coming from advertisers switching away from free-to-air TV: television ad spending was down 14% in 2023, and radio down 6%.
The beauty of OML is that it is able to target certain areas of the market very strategically. For example, its specialist airport network covers all domestic Qantas Club, Business, and Chairmans Lounges, along with Qantas in-flight entertainment and onboard Wi-Fi. At Melbourne Airport, its ‘Queen Victoria’ billboard, one of the largest airport billboards in the Southern Hemisphere, installed in 2023, reaches what the company says is “effectively 100%” of the premium airport audience, which it characterises as “C-suite” (the top level of corporate executives). This ties in with the company’s large office presence: OML has more than 5,000 full-motion digital screens in more than 650 prominent Australian office towers. The strategy is that OML can reach the premium professional audiences, at scale, as they move across offices and airports, keeping the advertising messaging consistent from office to airport to in-flight.
OML is also targeting these audiences where they live, with its pilot ‘Premium Sydney’ offering, for example, being rolled out across ten eastern Sydney suburbs, with a digital street furniture network featuring 77 strategically placed state-of-the-art LED screens, powered entirely by renewable energy, which can host local government and community-organisation information as well as advertising. The next part of the strategy, launched in 2023, is “reooh,” the specialist arm that will drive further expansion into ‘retail media,’ advertising in shopping environments, a sector that OML says is growing rapidly on its way to being a $3 billion sector by 2027. Reooh won its first long-term contracts s with The Warehouse Group (NZ) and Drakes Supermarkets in Australia, with a “strong pipeline building” according to OML. By these and other strategies – such as ‘programmatic’ advertising, which is the use digital advertising that can be highly tailored in content and length of time of visibility – OML is confident that it can deliver above-market growth.
In 2023 (OML uses the calendar year as its financial year) OML lifted revenue by 7%, to $633.9 million, and boosted profit by almost 10%, to $34.6 million. The full-year dividend was boosted by 17%, to 5.25 cents a share fully franked, but there is good scope to increase this, as the payout ratio was 51%.
The company renewed 75% of the large contracts that expired in 2023, equating to 65% of revenue. It is well-diversified across its customer base: no one contract is worth more than 6% of 2023 revenue. The company expects new contracts signed in 2023 to deliver $30 million in annualised revenue upside from mid-2024.
There is a solid fully franked dividend yield on offer from OML but longer-term, there should also be nice capital growth as the out-of-home sector grows, and the company builds on its great position. UBS, which recently started covering the stock, sees OML at $2.05 in 12 months’ time.
- RPMGlobal (RUL, $2.23)
Market capitalisation: $500 million
12-month total return: 53.8%
3-year total return: 17.6% a year
FY25 estimated yield: no dividend expected
FY25 estimated price/earnings (P/E) ratio: 38.4 times earnings
Analysts’ consensus target price: $2.15 (Stock Doctor/Refinitiv, 1 analyst)
RPMGlobal is one of the Australian stock market’s best overseas performers that you’ve probably never heard about. It specialises in mining software, and virtually wherever mining is conducted around the world, miners use RPMGlobal’s suite of state-of-the-art enterprise software technology packages, to manage their operations, assets, planning and sustainability/ESG and net-zero considerations. It is a range of products that cover all aspects of mining and is leading the resources industry’s adoption of the artificial intelligence and digitisation trends that are revolutionising all industries. RPMGlobal also has advisory and training divisions and has customers in 125 countries.
RPMGlobal’s AMT asset maintenance software solution is now virtually the mining industry’s de facto standard for mobile mining equipment maintenance for Tier 1 and 2 miners and mining OEMs (original equipment manufacturers). Its XECUTE mine planning and execution software solution is a live system that allows miners to have their ERP (enterprise resource planning) systems, maintenance and fleet management systems and geological data update in real-time, so all users can see all live changes. Its ShiftManager software solution is the operational management solution.
These flagship products are backed up by a range of other offerings that includes the IMAFS AI software that handles inventory management on site; the EnviroDataVault (EDV) software solution that captures, stores, manages and shares a miner’s environmental data; the HAULSIM mining simulation product; the Underground Metals Solution (UGMS) mine planning optimiser and the Truck and Loader Productivity and Cost calculator (TALPAC) 3D truck haulage simulation software. The company says it has an integrated platform solution for the entire mining value chain.
RPMGlobal taps into five major tailwinds.
The first is that because its products are very highly regarded for their effectiveness, RPMGlobal sits right in the sweet spot of the laser-like focus that mining companies have on their costs and productivity – they are looking to control fully all of the aspects of their business that they can control, and RPMGlobal’s products allow them to do this.
The second is that the company is very well-positioned to be at the forefront of the mining boom that will be required to extract the minerals required for the great clean-energy and electric-vehicle transition that the world is embarking upon. The company is well-diversified across commodities: at present, iron ore represents 42% of software revenue, with coal 22%, 11% chemicals, potash and quarries, and the rest gold, copper, and other metals. But within that final category sits the tailwind of clean-energy and battery metals, the demand for which is going to surge.
The third tailwind is ESG, which RPMGlobal says is “now the number one consideration on mining CEOs’ minds as they navigate their companies through climate change and transition to a lower-carbon economy.” The company’s establishment of a dedicated ESG division, in July 2021, was well-timed: it now has the largest pure-play ESG mining advisory business in Australia and is progressively adding to its ESG capabilities.
The fourth is that many miners are still relatively early on their journeys in terms of mining software adoption and digitisation; the market leader will benefit from this.
The fifth tailwind is the move from perpetual purchase and licensing of enterprise software to cloud-based software-as-a-service (SaaS), which gives a software business both operating and financial leverage, and a more predictable revenue model. RPMGlobal is continuing to change its customers from the former model to the SaaS model.
Software represents 67% of revenue, with advisory 32%, and the balance training. In FY23, RPMGlobal reported total revenue of $98.4 million, up 17%; earnings before interest, tax, depreciation, and amortisation (EBITDA) rose 3.4 times to $12 million; and at the bottom line, the company swung from a net loss of $4.6 million in FY22 to a net profit of $3.7 million.
In the half-year to December 2023, revenue was up 20.6%, to $56.2 million; and net profit was up almost six times, to $6.8 million. On the back of this, RPMGlobal reaffirmed its (already upgraded) FY24 guidance: revenue is projected to be in the range of $110 million—$115 million, which would be a rise of 11.8%—16.9%; EBITDA is projected to be in the range of $21.5 million—$23.5 million, representing an increase of 79.2%—95.8%; and pre-tax profit is forecast in the range of $16.5 million—$18.0 million, up 3.4 times—3.8 times.
For a company that has such a big global footprint in its industry, RPMGlobal is not a well-followed stock, but it seems clear that it has very robust prospects for revenue and earnings growth ahead of it.
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