KUALA LUMPUR (March 3): Digital media and advertising group Catcha Digital Bhd (KL:CATCHA), which has seen its earnings double in its recently concluded FY2024, plans to continue to expand via mergers and acquisitions (M&As), and may spend more than the RM80 million it set aside in September last year for this purpose.

Catcha Digital, which just announced over two months ago that it was buying controlling stakes in three companies, said its acquisitions typically fall into two categories: platform acquisitions and add-on acquisitions.

"Platform acquisitions involve acquiring businesses with sufficient scale or those that will achieve scale through a focused buy-and-build strategy, while add-on acquisitions are made to grow and scale existing platform acquisitions," chief executive officer Eric Tan Leong Yit told a briefing with investors on Monday.

The group aims to strengthen its position as a comprehensive online-to-offline (O2O) digital media solutions provider and has been focusing on the digital out-of-home (DOOH) space to build the O2O ecosystem, to integrate it with advertisers.

Catcha Digital will also expand through M&As and partnerships in the experiential in-person marketing space, which is crucial for its O2O strategy.

It plans to pursue M&As both horizontally and vertically to strengthen its core digital media business.

In terms of the industry's advertising expenditure (adex) outlook, the company anticipates the first half of 2025 to be similar to the previous year, with slight growth expected.

The company has previously said it will focus on ensuring that all its deals are earnings-accretive, targeting an internal rate of return (IRR) of 20%.

In December last year, Catcha Digital announced three acquisitions with a total purchase price of RM35.18 million, cash. Payments for these acquisitions were structured in tranches that are contingent on performance, which will incentivise the existing management to perform, said Tan.

The company is acquiring a 70% stake in leading food expo provider, Tastefully Malaysia Sdn Bhd, for RM7.6 million to strengthen its position in the integrated digital and offline advertising space.

It is also acquiring a 60% stake in Drive 2 Digital Sdn Bhd (D2D) for RM16.2 million to expand into the automotive digital media space, and a 51% stake in artificial intelligence (AI) powered sales automation software provider Nexible Solutions Sdn Bhd for RM11.38 million to drive synergistic cross-selling.

The Tastefully Malaysia deal is payable in four tranches over 36 months, contingent upon achieving profit targets of RM500,000, RM1.1 million, RM1.4 million, and RM1.6 million across the respective periods.

The D2D deal is payable in three tranches over 24 months, contingent upon achieving profit targets of RM3.5 million in the first 12 months and RM4.2 million in the subsequent 12 months.

The Nexible Solutions' acquisition is payable in four tranches, contingent upon achieving profit targets of: RM700,000 for the financial year ending April 30, 2024 (FY2024), RM1.2 million for FY2025, RM2.2 million for FY2026, and RM3.3 million for FY2027.

Cumulatively, the profit guarantees amounted to RM18.5 million from 2025 to 2027, against the total purchase price of RM35.18 million.

Catcha’s sole revenue generator is its digital media advertising business, which is under iMedia Asia Sdn Bhd, acquired in 2021. The business operates 13 digital media publishers, including Goody, Oh! Media, Kimchi Daily, Beautiful Nara, Moretify, Weirdkaya, and The Reporter.

For the fourth quarter ended Dec 31, 2024 (4QFY2024), Catcha Digital reported a quarterly net profit of RM1.84 million, up from RM110,000 in the previous year, as quarterly revenue surged 66.8% to RM10.84 million from RM6.5 million.

The improved financial performance was attributed to higher online advertising revenue from iMedia Group due to increased advertisement inventory, the group stated in a bourse filing.

For the 12 months ended FY2024, the group’s net profit more than doubled to RM5.27 million from RM2.06 million, while total revenue increased 62.9% to RM39.39 million from RM23.57 million.

As at end-2024, its cash and cash equivalents stood at RM5.03 million, with no material borrowings.

Catcha Digital exited Guidance Note 2 (GN2) status — a designation for cash companies that lack a substantial operating business — in July 2023, after it acquired iMedia Asia for RM43.92 million in cash and shares.

The company was classified as GN2 in August 2017, following the sale of its then digital asset Rev Asia Holdings Sdn Bhd to Media Prima Bhd (KL:MEDIA) for RM105 million.

At the time of writing, Catcha Digital shares were up one sen or 3.2% at 32.5 sen, valuing the group at RM117.06 million.