Sensory Marketing Growth: IMS and the Closer Music Project
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IMS is a growing dividend company operating on the sensory marketing market. The company's business model underwent a very difficult test during the coronavirus pandemic, which left a strong mark on the previously very good financial results of the entire group. The past year, however, showed that IMS's results did not collapse permanently and its good prospects largely remained in force. Unfortunately, the company's operating model results in limited opportunities for its development outside Poland, which over time will limit the dynamics of business growth. The Closer Music project, which has been developed since 2019, is to be the answer to these limitations. At the same time, however, the startup nature of the project causes great difficulties in its valuation, and therefore at the moment it should be treated as an interesting option, which in the future may, but does not have to, bring benefits to shareholders.
Cash generator by subscription model
IMS's distinguishing feature is the subscription model of its key audio, video and aromamarketing segments. This ensures high predictability and repeatability of revenues. At the same time, the company has shown that it can systematically grow both through acquisitions and organically. All this took place with high profitability of the business and, as a consequence, made it possible to share profits with shareholders in the form of annual dividends. A crack on this picture was caused by the pandemic, which showed that the company's operating model is not bulletproof and remains sensitive to both the economic situation and the development prospects of the brick-and-mortar sales and service network. However, it seems that with the end of the pandemic, the situation is returning to the old ways and customers have returned to shopping centers. Thus, IMS faces a real chance to return to the growth path outlined before 2020. The market valuation seems more conservative in this regard, hence we start covering the company with a "Buy" recommendation.
Prospects of profitable growth with an option for more
In our forecasts, we assume a gradual return of operating profitability to the levels achieved before the pandemic. In the longer term, we conservatively forecast a slight decrease, but systematically growing revenues will result in the progression of profit, which can be distributed in the form of dividends. Thus, we consider IMS to be an interesting investment option that combines the growing and predictable business of sensory marketing with a possible bonus in the form of the Closer Music project being developed. Due to the lack of financial data and the difficulty in assessing the likelihood of success by Closer Music, we valued it at the amount of costs incurred so far for the production of music content. It is of real value also for the IMS itself.
