Strategic Expansion: IMS's Ambitious Plans for 2024
Aa
Share
IMS has ambitious plans for 2024. They are mainly related to the desire to scale up operations at Closer Music, but also to reorganize the advertising segment, which was somewhat disappointing with its results in the last quarter of last year. These changes will require additional expenditure, the scale of which the company will probably try to adapt to the amount of available financing (mainly external financing in the form of inviting new investors to the Closer Music project).
Ultimately, these expenses should result in a noticeable increase in revenues, but at the same time in the short term they will reduce profitability.
Therefore, we adjust our forecasts to new, more investment-oriented assumptions. We are also raising the target price for IMS shares to PLN 5.0 per share (previously PLN 4.6). However, due to the share price increase, we are lowering our recommendation from "buy" to "accumulate".
Closer Music with potential
In its annual report, IMS revealed the resulting secret of its flagship development project. Closer Music generated PLN 5.1 million in revenues in 2023 with a high operating profitability of 36%.
The net margin was 15% and was also higher than for the entire group. CM owes such good results to the settlement of royalties from two collective management organizations, the scale of which we estimate at approximately PLN 4 million. The company announced that after the possible finalization of cooperation with the last organization (STOART), the estimated annual value of recurring revenues from subscriptions will reach PLN 7 million. This means that there is still significant growth potential in CM from royalties alone.
Additionally, Closer Music managed to sign an agreement with Rossmann for comprehensive music services for approximately 1 800 locations under this brand. Closer Music is clearly developing, although this development will require greater expenditure than last year. As a result, we consider last year's profitability results to be impossible to repeat in the near future.
