Mondo TV — Growing library in a content-hungry world

Mondo TV (MI: MTVI)

Last close As at 27/03/2024

1.09

0.02 (1.48%)

Market capitalisation

50m

More on this equity

Research: TMT

Mondo TV — Growing library in a content-hungry world

Mondo TV’s Q3 results continued in the more positive vein established in H1, with the flow of new content and licensing agreements carrying through into Q4 across a good range of properties, including new titles in the German JV with Toon2Tango. In October, the group announced new licensing deals in Russia with Gazprom Media and PJSC MegaFon for the streaming of Mondo TV library content. These deals help rebalance group revenues, historically heavily biased to Asia. Management’s business plan for FY19–FY23 (to which we have built in a degree of contingency) is unchanged, as are our forecasts.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

Mondo TV

Growing library in a content-hungry world

Q3 results

Media

19 November 2019

Price

€1.23

Market cap

€45m

Net debt (€m) at end September 2019, adjusted for IFRS 16

0.1

Shares in issue

36.4m

Free float

62%

Code

MTVI

Primary exchange

Borsa Italiana Star

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(2.5)

17.3

(37.0)

Rel (local)

(7.2)

1.9

(48.8)

52-week high/low

€2.22

€0.93

Business description

Mondo TV is a global media group with a focus on the production, acquisition and exploitation of animated children’s television series. Headquartered in Rome, it also holds controlling stakes in listed subsidiaries Mondo TV France (23%), Mondo TV Suisse (56%) and Mondo TV Iberoamerica (71%). It owns the rights to over 1,600 TV episodes and films, which it distributes across 75 markets. 83% of revenues are generated in Asia, with the remainder from Europe and South America.

Next events

Full year update

End March 2020

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Russell Pointon

+44 (0)20 3077 5700

Mondo TV is a research client of Edison Investment Research Limited

Mondo TV’s Q3 results continued in the more positive vein established in H1, with the flow of new content and licensing agreements carrying through into Q4 across a good range of properties, including new titles in the German JV with Toon2Tango. In October, the group announced new licensing deals in Russia with Gazprom Media and PJSC MegaFon for the streaming of Mondo TV library content. These deals help rebalance group revenues, historically heavily biased to Asia. Management’s business plan for FY19–FY23 (to which we have built in a degree of contingency) is unchanged, as are our forecasts.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

EV/EBIT
(x)

P/E
(x)

12/17

32.0

15.4

43.0

0.0

1.1

2.9

12/18

18.9

(30.1)

(56.3)

0.0

N/A

N/A

12/19e

20.8

6.0

10.3

0.0

3.0

12.0

12/20e

27.8

7.8

12.8

0.0

2.3

9.6

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Remains on business plan target trajectory

Group production value for the nine months to end September 2019 was €19.3m, 13% below the same period in FY18, a reducing percentage decline vs. H1, and well on track to meet management’s €24.5m FY19 business plan target. EBITDA of €11.9m compares with the full year target of €14.3m. The period-end net debt position of €0.1m includes IFRS 16 liabilities of €1.7m, with gross cash of €9.4m. There was no update on the outstanding dispute with the Italian tax authorities (see May update) or on negotiations with its Asian ex-customer New Information Tech.

Broadening the project range

In October, Mondo TV announced further cooperation with York Animation, a leading Chinese studio with which it worked on YooHoo to the Rescue (now airing on Netflix), Invention Story and Robot Trains, for four projects over three years, at an investment cost of $17m. It will be producing a third series of Robot Trains with CJ in Korea. Four further animation projects are lined up with Toon2Tango. The first joint project, Agent 203, is launched. Mondo TV is now licensing agent for The Gruffalo in Italy, Spain and Portugal and, as rights holder for Feisty Pets in those regions, has awarded publishing rights to PRH. Its unscripted live action web series, House of Talent, is in production and looks set to provide additional exploitation opportunities. Mondo TV has also taken a first step in the video games market with a €90k investment in a UK developer.

Valuation: Marked discount to peers and DCF

Mondo TV’s shares trade at a substantial discount to global peers. Parity on EV/EBIT would indicate a value of €2.46/share and on P/E €1.82/share. EV/EBIT peer multiples have reduced and P/Es have slightly risen since our September note. A DCF (WACC of 11.5%, terminal growth 2%) suggests a price of €2.02. The average of the three values is €2.10 (€2.22 in September), well ahead of the current price.

On track to meet full year guidance

The Q3 report shows figures broadly in line with those achieved across the first two quarters, with the reductions over the prior year reflecting the revised strategy as put in place at the end of FY18 (see our December 2018 update). The FY19 business plan, published in December 2018, targeted revenue of €21.4m plus capitalised costs of €3.1m, generating EBITDA of €14.3m (which would be increased to around €14.6m because of the adoption of IFRS 16), EBIT of €6.8m and net profit of €4.1m. These targets are consistent with the published results for the first nine months of 2019.

Exhibit 1: Mondo TV Group’s Q319 results summary

€m

H119 (IFRS 16)

Q319 (IFRS 16)

9M to September 2019

% change y-o-y

Revenue

11.0

5.7

16.7

(17.7)

Capitalised content development

1.8

0.9

2.6

37.3

Production value

12.8

6.6

19.3

(13.0)

Operating costs

(5.0)

(2.4)

(7.4)

21.7

EBITDA

7.8

4.2

11.9

(26.1)

D&A (including exceptionals)

(4.5)

(2.6)

(7.1)

20.8

EBIT

3.3

1.6

4.8

(52.9)

Net financial costs

(0.1)

(0.1)

(0.2)

N/A

PBT

3.2

1.5

4.6

(56.0)

Tax

(1.2)

(0.6)

(1.7)

(46.1)

Minorities

0.0

(0.1)

(0.1)

(62.3)

Net profit

2.0

1.0

3.0

(60.5)

Source: Company accounts

We forecast investment in content for the current year at €17.4m, reducing to €11m in FY20e and FY21e. €13.4m had been invested as at the end of September, so again broadly in line with the full year target. This implies a cash outflow for the year as a whole and our modelling suggests a year end net debt figure of €1.2m, increased to €2.9m on an IFRS 16 basis (was €5m in our previous note). We expect the group to be free cash flow positive in FY20e.

Valuation

Exhibit 2: Peer group valuation

Name

Curr

Price

Market cap (m)

Ytd perf
(%)

P/E
last
(x)

P/E
FY1
(x)

P/E
FY2
(x)

EV/
Sales last (x)

EV/
EBITDA last (x)

EV/
EBITDA FY1 (x)

EV/
EBITDA FY2 (x)

EV/
EBIT
last (x)

EV/
EBIT
FY1 (x)

EV/
EBIT FY2 (x)

Yield FY1 (%)

eOne

GBp

557

2,778

56.2

54.9

21.0

18.6

3.0

14.2

12.9

11.8

18.1

16.6

15.9

0.3

Xilam Animation

EUR

40.95

201

8.8

31.1

27.1

20.4

6.9

8.2

8.3

7.0

21.7

19.1

14.2

0.0

Mediawan

EUR

9.48

303

(13.8)

12.7

11.7

8.7

8.7

7.6

10.1

10.2

8.7

0.0

Lions Gate Ent

USD

9.74

2,040

(39.5)

15.2

12.1

9.8

1.3

18.2

9.7

8.9

47.7

12.7

11.9

0.0

Toei

JPY

4,855

203,910

20.0

16.8

17.3

16.0

3.1

10.3

10.8

12.6

11.5

1.5

Corus Ent

CAD

5.60

1,187

17.9

6.7

5.8

6.1

1.8

5.1

5.2

5.3

7.4

7.0

7.1

4.3

Spin Master

USD

38.96

3,979

1.5

31.9

20.1

17.2

1.9

13.3

9.6

8.9

23.0

13.6

12.2

0.0

Amuse

JPY

3,010

56,057

29.0

11.8

17.2

16.6

0.6

6.6

7.2

6.3

6.1

1.2

Average

10.0

24.1

17.3

14.6

2.7

10.6

9.1

8.2

19.0

12.3

10.9

0.9

Mondo TV

EUR

1.24

45

(11.4)

(2.2)

12.1

9.7

1.0

1.7

1.3

1.0

(0.6)

3.0

2.4

0

Discount (%)

N/A

30

33

62

84

85

88

N/A

75

79

100

Source: Refinitiv, Edison Investment Research. Note: Priced at 15 November 2019.

We adjust Mondo TV’s EV for the value of minorities in quoted subsidiaries. It continues to trade at a substantial discount to the global peer group across all relevant metrics. We prefer to compare on EV/EBIT to avoid discrepancies from the varying treatments of capitalisation of production costs across the peers. Parity on this basis would imply a share price of €2.46 (€2.82 in September). On a P/E basis, again averaged across years one and two, parity equates to a share price of €1.82 (was €1.75).

Exhibit 3: Financial summary

€'m

2016

2017

2018

2019e

2020e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

27.4

32.0

18.9

20.8

27.8

Cost of Sales

(9.3)

(8.3)

(7.7)

(6.4)

(8.6)

Gross Profit

18.1

23.7

11.2

14.4

19.1

EBITDA

 

 

18.1

23.7

11.2

14.4

19.1

Operating Profit (before amort. and except.)

 

 

12.7

17.6

(30.6)

6.3

8.1

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

(23.9)

0.0

0.0

Share-based payments

0.0

0.0

0.0

0.0

0.0

Reported operating profit

12.7

17.6

(54.5)

6.3

8.1

Net Interest

0.0

(2.2)

0.5

(0.3)

(0.3)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

12.7

15.4

(30.1)

6.0

7.8

Profit Before Tax (reported)

 

 

12.7

15.4

(54.0)

6.0

7.8

Reported tax

(4.5)

(3.1)

11.5

(1.7)

(2.2)

Profit After Tax (norm)

8.3

12.3

(22.0)

4.3

5.6

Profit After Tax (reported)

8.3

12.3

(42.5)

4.3

5.6

Minority interests

0.3

0.5

3.0

(0.7)

(1.0)

Discontinued operations

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

8.6

12.8

(19.0)

3.6

4.6

Net income (reported)

8.6

12.8

(39.5)

3.6

4.6

Average Number of Shares Outstanding (m)

27

30

34

35

36

EPS - normalised (c)

 

 

31.1

43.0

(56.3)

10.3

12.8

EPS - normalised fully diluted (c)

 

 

31.1

43.0

(56.3)

10.3

12.8

EPS - (c)

 

 

31.1

43.0

(117.0)

10.3

12.8

Dividend per share (c)

2.0

0.0

0.0

0.0

0.0

Revenue growth (%)

63.2

16.8

(40.9)

10.2

33.2

Gross Margin (%)

66.0

74.0

59.2

69.3

69.0

EBITDA Margin (%)

66.0

74.0

59.2

69.3

69.0

Normalised Operating Margin

46.4

54.9

(162.0)

30.4

29.4

BALANCE SHEET

Fixed Assets

 

 

37.0

47.9

46.0

56.0

56.7

Intangible Assets

31.4

44.1

30.9

40.9

41.5

Tangible Assets

0.3

0.4

0.4

0.4

0.4

Investments & other

5.3

3.4

14.7

14.7

14.7

Current Assets

 

 

37.8

53.6

37.2

35.7

51.3

Stocks

0.0

0.0

0.0

0.0

0.0

Debtors

31.7

47.9

20.6

28.4

37.8

Cash & cash equivalents

1.8

2.4

12.4

3.2

9.3

Other

4.3

3.3

4.2

4.2

4.2

Current Liabilities

 

 

(14.0)

(22.6)

(25.1)

(28.8)

(36.7)

Creditors

(11.7)

(15.0)

(21.6)

(23.1)

(30.9)

Tax and social security

(0.2)

(0.4)

(0.5)

(0.5)

(0.5)

Short term borrowings

(2.1)

(3.6)

(3.0)

(5.3)

(5.3)

Other

0.0

(3.7)

(0.0)

0.0

0.0

Long Term Liabilities

 

 

(0.8)

(1.2)

(1.9)

(4.2)

(4.3)

Long term borrowings

(0.6)

(0.7)

(1.3)

(4.1)

(4.2)

Other long term liabilities

(0.2)

(0.5)

(0.6)

(0.1)

(0.1)

Net Assets

 

 

60.0

77.7

56.1

58.7

66.9

Minority interests

0.0

(0.6)

2.1

0.7

1.0

Shareholders' equity

 

 

60.0

77.1

58.2

59.4

68.0

CASH FLOW

Op Cash Flow before WC and tax

18.1

23.7

11.2

14.4

19.1

Working capital

(1.9)

(11.2)

6.0

(4.7)

(1.6)

Exceptional & other

0.7

(0.8)

(11.0)

0.0

0.0

Tax

(4.5)

(3.1)

11.5

0.0

0.0

Net operating cash flow

 

 

12.5

8.7

17.6

9.8

17.5

Capex

(20.6)

(19.2)

(28.6)

(17.5)

(11.1)

Acquisitions/disposals

0.0

0.0

0.0

0.0

0.0

Net interest

(0.2)

(0.2)

0.0

(0.3)

(0.3)

Equity financing

7.2

9.4

20.9

1.2

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

Other

0.3

0.1

0.0

(2.3)

0.0

Net Cash Flow

(0.7)

(1.2)

10.0

(9.2)

6.1

Opening net debt/(cash)

 

 

0.2

0.9

2.0

(8.0)

2.9

FX

(0.1)

0.1

0.0

0.0

0.0

Other non-cash movements

0.0

0.0

0.0

(1.7)

0.0

Closing net debt/(cash)

 

 

0.9

2.0

(8.0)

2.9

(3.2)

Source: Company accounts, Edison Investment Research

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This report has been commissioned by Mondo TV and prepared and issued by Edison, in consideration of a fee payable by Mondo TV. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Lepidico — Caesing the opportunity

On 21 October, Lepidico announced that it had produced a high-specification sample of caesium-rubidium formate brine from its pilot plant, which employs its proprietary process technologies, including L-Max® (hereafter L-Max). The brine is reported to have low levels of deleterious elements and to meet key specification criteria for use in the oil and gas industry, where such solutions have properties suitably unique for use as completion fluids (see pages 3–4). Following its acquisition of Desert Lion Energy (DLI) in July, Lepidico intends to produce a revised mineral resource estimate for the Karibib Lithium Project in Namibia in early December, including grades for both caesium and rubidium, which will allow production estimates for these metals to be calculated for the first time.

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