Parallel Media

AVOID

11/10/2006

Asian-focused ‘executive sports’ marketing and event management venture Parallel is lining up new opportunities after buying its way out of a lossmaking partnership.

Chairman and CEO David Ciclitira has been running the golf-focused company for 18 years, running tournaments and selling their advertising and TV rights. Parallel had been consistently lossmaking for the three years since it joined AIM, but knocked in a small £3,000 pre-tax profit for the half-year to June on revenues down almost a quarter to £1.5m over the summer.

Profits could have been £175,000 higher but for losses shared with an Asian partner and a bank loan. Parallel has now bought its way out of this partnership agreement and paid off the loan, using roughly half of a £3.6m fundraising. The split with Malaysian group PMA left Parallel the rights to the UBS Hong Kong Open and the TCL Classic, both events on the PGA European tour. The company also runs the Kazakhstan Open and the Samsung Ladies Masters in Singapore as well as being the commercial partner to the Ladies European Tour.

But Ciclitira is most excited by the company’s appointment as commercial partner to the World Cup of Golf at the immense Mission Hills resort in China. ‘We bear no risk,’ he boasts, ‘as a commercial partner we get paid a percentage of the monies earned – so there’s no downside.’ This event seems to be a coup for Parallel, which has strong relationships with the organiser, as the PGA has been trying to organise a Chinese stage of its World Golf Championship for some time and has agreed to hold a stage at Mission Hills every year until 2018.

Ciclitira’s medium-term strategy is to increase the portfolio further – there are ‘other golf tournaments in Europe in development’ – and for the long-term ‘look at developing a property angle’, such as the options signed with the developers and tourist boards in Croatia and Mauritius.

The shares have only been consistent in their inconsistency and are hence very cheap. Avoid until Ciclitira’s ‘back to basics’ strategy shows signs of holing out.