National World (LSE: NWOR) is a media company I’d never heard of until recently. In fact, I stumbled across it accidentally, to be honest. I’m glad I did. Since starting my research, I’ve heard a professional investor with City experience talk it up on a webinar and been impressed with what I’ve read in the newly-listed company’s documents.
First off it’s small, the market cap of National World is only about £80m. That’s good though. It means there’s plenty of room for growth.
Given that most people have never heard of National World it may be best to start with what it does. It’s a media company acquiring print and online assets. This has started with acquiring the titles which were held by JPIMedia, like the Yorkshire Post.
This makes its strategy and business model similar to high-performing turnaround share Reach. It also bears some similarities to Future Group as well.
A new media company
The company has only just started trading and making revenue this year. Undoubtedly there are a lot of unknowns with this investment.
However, I like that it has a very experienced management team. The executive chairman for example has a lot of industry experience, both in business and journalism. He is a former business founder, chief exec of a similar business to National World and previously an editor.
The management team seems to be making good progress with achieving £5m of annualised savings and target a doubling of online audiences by the second half of 2022. Both developments could really help the National World share price.
At the end of May 2021, it had £18m of cash so it’s well capitalised to buy up more media assets and look to improve them. This seems to be the business model as I understand it, focused primarily on local media assets.
A subscription-based business model, less reliant on Facebook and Google and advertising money, could lead to greater recurring revenue and profits. Progress in signing up subscribers, I think, could hold the key to strong future growth and this is what I’d keep an eye on. Currently, it makes £600,000 from subscribers so there’s plenty of room for growth, probably both organic and through further acquisitions.
National World is rolling out subscriptions across 35 sites and adding a new platform – both could help boost profits and therefore over the long term the share price. A lot of current revenue still seems to come from print, indicating that there’s a lot of potential to grow the digital side of the business, which I feel bodes well for the future.
The risks
This investment is potentially very risky, however. The market capitalisation of the company is already over £80m, despite there being no profits. It’s looking to grow by acquisition, which always introduces a financial risk and the possibility of overpaying and stretching the balance sheet too far.
With print newspapers in long-term decline, there’s a need to rapidly grow subscriptions and digital revenues. Failure to do so may make the shares very expensive.
It’s early days to value this small business, which makes investing tricky. However, with experienced management, with significant holdings and a business model that has worked well for other listed companies, I’m tempted to add National World speculatively to my portfolio.
