Dentsu Group

CN: 4324

Market CapJPY1116146m

Last Close JPY3870

Dentsu Group is a holding company with two operational networks: Dentsu Japan Network (DJN) and Dentsu International (DI). Operating in over 145 countries, Dentsu Group provides a wide range of client-centric integrated communications, media and digital services.

Investment summary

Dentsu posted a very strong performance for Q321, with revenue less cost of sales (RLCoS) up 27.8% on an organic basis and a substantial uplift in operating margin to 23.5%, from 12.2% in Q221. Full-year guidance is raised, having been lifted in August, with an indication of a FY21 margin of 18.0% after greater intended investment in Q4. Proposed board changes for the new year split the chairman and CEO roles, with the existing CEO retiring and appointments of independent non-executives planned. The better performance and balance sheet strength support an uplift in DPS, with ¥113.5 now expected for the full year (previously ¥101).

Y/E Dec	Revenue (¥m)	EBITDA (¥m)	PBT (¥m)	EPS (fd) (¥)	P/E (x)	P/CF (x)
2019A	1047881.0	160279.0	101340.0	271.0	14.3	0.2
2020A	939243.0	90063.0	123470.0	249.0	15.5	N/A
2021E	1068700.0	189458.0	135174.0	376.0	10.3	0.0
2022E	1125000.0	234091.0	140543.0	383.0	10.1	0.1

Industry outlook

In July, Dentsu lifted its global ad spend forecast to +10.4% in FY21 and +7.2% for FY22. Digital spend is set to increase by 15.6%. The Japanese ad market still lags the digital transition curve, with TV prominent, but faster growth in digital will improve digital’s share of spend to 38.1% in FY21, still well below the 50% global share. The FY20 postponement of the Tokyo Olympics contributed to a y-o-y ad spend decline of 16.6% in Japan. Forecast recovery is 4.4% in FY21, and +4.2% in FY22.

Last updated on 25/11/2021