Mondo TV is a global media group focused on the production, acquisition and exploitation of animated children’s television series. It owns the rights to >1,500 TV episodes and films and distributes across 75 markets. 83% of FY17 revenues were generated in Asia, with the remainder from Europe and South America.
Mondo TV is set to focus its efforts on a smaller number of more profitable properties, following a difficult H218. The group’s geographic spread will also be readjusted – partly as a result of existing Asian clients scaling back their purchasing – giving a better balance between destination markets. The global market appetite for quality content remains strong with channel proliferation. On reduced forecast revenues, Mondo TV remains comfortably profitable, with net cash on the balance sheet, and should return to being cash flow positive in FY20 in our modelled scenario. Our view is that the attrition of the share price has been overdone.
The market for children’s entertainment has been reinvigorated with the growth of VOD platforms looking for multi-territory content. Animations travel well and, as seen from the success of eOne’s Peppa Pig, brands that travel have the potential to yield significant returns. Smaller players can also be very profitable, particularly when, like Mondo, they have a flexible cost base and high share of revenues from licensing and merchandising sales.