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Production value well ahead

Mondo TV 17 September 2021 Update
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Mondo TV

Production value well ahead

Interim results

Media

17 September 2021

Price

€1.42

Market cap

€62m

Net debt (€m) at 31 June 21 (IFRS)

3.6

Shares in issue

43.6m

Free float

71.6%

Code

MTVI

Primary exchange

Borsa Italiana Star

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(3.8)

(13.3)

(18.5)

Rel (local)

(2.2)

(14.0)

(37.6)

52-week high/low

€1.81

€1.21

Business description

Mondo TV is a global media group with a focus on the production, acquisition and monetisation of animated children’s television series. Headquartered in Rome, it also holds controlling stakes in listed subsidiaries Mondo TV France (21%), Mondo TV Suisse (63%) and Mondo TV Iberoamerica (78%). It owns the rights to more than 1,600 TV episodes and films, which it distributes across global markets.

Next events

Q3 figures

12 November 21

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Max Hayes

+44 (0)20 3077 5700

Mondo TV is a research client of Edison Investment Research Limited

Mondo TV’s interims show a big step up in production value to €17.5m at end June (+36% y-o-y), with delivery of 26 episodes of Disco Dragon from Mondo TV France a large element. The regular stream of newsflow of sales and licensing agreements continued through H1, underpinning forecast progress for FY22. The newer deals give a broader international reach, reducing the weighting of Asia in the mix. The €10.5m funding from Atlas Special Opportunities has secured the balance sheet, allowing for the associated investment. The rating remains modest, given the continuing strong demand for original content and the proliferation of platforms.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

EV/EBIT
(x)

P/E
(x)

12/19

23.1

6.2

11.3

0.0

7.0

12.6

12/20

24.7

6.4

13.2

0.0

6.0

10.8

12/21e

29.2

9.1

14.6

0.0

5.4

9.8

12/22e

31.3

10.2

18.3

0.0

4.9

7.8

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

Deal flow momentum continues

H121 was very busy at Mondo TV France, with the delivery of Disco Dragon. Elsewhere, the pre-purchase of Grisù by RAI on a seven-year licence is particularly significant as it effectively underwrites the project cost. Our Outlook note outlined key recent deals to end April 2021. Since then, Mondo has also sold some licence rights in China for Invention Story (plus one other property) as well as some audio-visual rights in other Asian territories for US$4.2m, which we assume falls mostly in FY22. More recently, Mondo has also contracted a new property for the Argentinian market, Nivis, agreeing 12 11-minute episodes for US$0.4m. This is the first third-party contract for the upgraded Gran Canarias animation facility (currently conducting a reverse takeover of Mondo TV Iberoamerica).

Growth in EBITDA and shareholder funds

Production value was 36% up on H121, with the European proportion increasing from 22% in H120 to 31% in H121. EBITDA was up 45%. The investment in new series means higher amortisation, with EBIT up 17% on H120. Net profit was ahead by 16%, with guidance for the full year at €5.9m, in line with our model. A swing in working capital with a reduction in receivables and the conversion of the final Atlas bonds (see Outlook note) lifted shareholder funds from €69.3m to €78.7m. Mondo is re-evaluating its functional responsibilities and structure, targeting savings up to €1.5m over 12 months, which should be within scope of our forecast.

Valuation: Deep discount persists

Parity to global peers on averaged earnings multiples across FY21 and FY22 would imply a value of €3.54/share. A DCF (WACC of 11.5%, terminal growth 2%) suggests a price of €2.03. The midpoint of these is €2.79. We would expect Mondo’s valuation discount to close further as the financial benefit of recent deals flows through to revenues and EBITDA.

A strong H121 performance

The figures for the first half year demonstrate clearly the strategy of concentrating mostly on opportunities outside of Asia is delivering results, with key properties such as MeteoHeroes, Disco Dragon and Grisù gaining good traction. The joint venture with Toon2Tango, discussed in previous notes, also allows for newer properties to be developed at lower financial risk.

The summary income statement for H121, shown below, shows the momentum. Progress at EBIT level is obviously more muted, given the increase in amortisation, but is nevertheless impressive at +17%. The underlying attributes of the market remain positive, with proliferating content channels, a very strong demand for children’s content (given how it can lead household platform subscriptions) and the appetite for animated content, which is readily adaptable for different territories.

Exhibit 1: H121 Mondo TV Group results summary

€m

H121

H120

% change

FY20

Revenue

15.0

11.2

+33

24.7

Capitalised content development

2.5

1.7

+48

5.7

Production value

17.5

12.9

+35

30.4

Operating costs

(5.5)

(4.6)

+18

(11.6)

EBITDA

12.1

8.3

+45

18.8

D&A (including exceptionals)

(7.9)

(4.7)

+66

(10.5)

EBIT

4.2

3.6

+17

8.3

Net financial costs

0.3

(0.2)

N/A

(2.4)

PBT reported

4.5

3.4

+33

6.0

Tax

(1.3)

(1.2)

+14

(2.0)

Minorities

(0.3)

0.2

N/A

0.4

Net profit

2.9

2.5

+16

4.4

Source: Mondo TV

Changes to detail, rather than substance of forecasts

Our projections for full year and FY22e production values (being revenue plus capitalised content development, so giving a better reflection of the levels of activity) and net income are unchanged on our previous estimates. Our EBITDA number for the current year is edged up from €24.6m to €25.8m to reflect the strong H121 but our assumptions for amortisation for both years are increased.

We have reduced our assumptions for net interest, with the benefit to the balance sheet of the conversion of the final Atlas bonds augmented by the positive swing in working capital (and management’s indications that H221 will also be positive). Minorites were a net positive in H121 and we have adjusted our full-year assumption to reflect this. The net effect is an unchanged estimate for FY21e net profit of €5.9m and an uplift in our estimate for FY22e from €7.1m to €7.7m. This assumes no major disruption or substantive cost relating to the planned internal structural review.

We are also now expecting the balance sheet to be more net cash positive by the end of the year, with a balance of €3.1m, up from €2.1m at the time of writing our June Outlook note, despite higher assumed levels of investment. We have also lifted our investment assumption for FY22e from €20.2m to €25.2m, given the momentum in the order intake. Despite this and a modelling of a small swing back in working capital, we expect the group to remain cash positive at the end of FY22e.

Exhibit 2: Financial summary

€'m

2019

2020

2021e

2022e

31-December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

23.1

24.7

29.2

31.3

Production value

26.7

30.4

34.9

36.9

Cost of Sales

(6.6)

(5.9)

(3.4)

(3.9)

Gross Profit

16.4

18.8

25.8

27.4

EBITDA

 

 

16.4

18.8

25.8

27.4

Operating Profit (before amort. and except.)

 

 

6.5

8.7

9.6

10.7

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

Exceptionals

(0.2)

(0.4)

0.0

0.0

Share-based payments

0.0

0.0

0.0

0.0

Reported operating profit

6.3

8.3

9.6

10.7

Net Interest

(0.3)

(2.4)

(0.5)

(0.5)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

6.2

6.4

9.1

10.2

Profit Before Tax (reported)

 

 

6.0

6.0

9.1

10.2

Reported tax

(2.1)

(2.0)

(2.7)

(3.2)

Profit After Tax (norm)

4.1

4.6

6.6

7.4

Profit After Tax (reported)

3.9

3.9

6.4

7.1

Minority interests

(0.1)

0.4

(0.5)

0.6

Discontinued operations

0.0

0.0

0.0

0.0

Net income (normalised)

4.0

5.0

6.1

8.0

Net income (reported)

3.8

4.4

5.9

7.7

Average Number of Shares Outstanding (m)

35

38

42

44

EPS - normalised (c)

 

 

11.3

13.2

14.6

18.3

EPS - normalised fully diluted (c)

 

 

11.3

13.2

14.6

18.3

EPS - (c)

 

 

10.8

11.4

14.1

17.6

Dividend per share (c)

0.0

0.0

0.0

0.0

Revenue growth (%)

21.9

7.1

18.4

6.9

EBITDA Margin on production value (%)

61.4

62.0

74.0

74.2

Normalised Operating Margin on production value (%)

24.4

28.7

27.6

29.0

BALANCE SHEET

Fixed Assets

 

 

50.5

59.1

70.6

79.7

Intangible Assets

35.8

44.8

56.8

65.8

Tangible Assets

1.6

1.2

1.2

1.3

Investments & other

13.1

13.1

12.6

12.6

Current Assets

 

 

35.7

43.6

46.8

48.6

Stocks

0.0

0.0

0.0

0.0

Debtors

24.9

30.7

30.9

32.4

Cash & cash equivalents

8.0

9.9

13.0

13.3

Other

2.8

3.0

3.0

3.0

Current Liabilities

 

 

(19.9)

(23.7)

(23.1)

(24.3)

Creditors

(13.8)

(14.6)

(16.9)

(18.2)

Tax and social security

(0.8)

(3.6)

(3.2)

(3.1)

Short term borrowings

(5.3)

(5.3)

(2.8)

(2.8)

Other

(0.0)

(0.2)

(0.2)

(0.2)

Long Term Liabilities

 

 

(4.7)

(9.6)

(7.9)

(7.9)

Long term borrowings

(4.1)

(8.8)

(7.0)

(7.0)

Other long term liabilities

(0.6)

(0.8)

(0.8)

(0.8)

Net Assets

 

 

61.6

69.3

86.4

96.1

Minority interests

(1.2)

(0.7)

(0.6)

(0.7)

Shareholders' equity

 

 

60.4

68.6

85.8

95.4

CASH FLOW

Op Cash Flow before WC and tax

16.4

17.0

25.3

27.4

Working capital

(10.6)

(2.5)

2.0

(0.2)

Exceptional & other

1.4

(0.4)

1.1

0.0

Tax

(2.1)

(2.0)

(3.4)

(3.9)

Operating cash flow

 

 

5.1

12.1

25.0

23.4

Capex

(14.2)

(18.7)

(27.7)

(25.2)

Acquisitions/disposals

(0.1)

0.0

0.0

0.0

Net interest

2.9

4.8

(0.5)

(0.5)

Equity financing

1.8

3.8

6.2

0.0

Dividends

0.0

0.0

0.0

0.0

Other

0.0

0.0

0.0

0.0

Net Cash Flow

(4.5)

2.0

3.1

(2.3)

Opening net debt/(cash)

 

 

(8.0)

1.4

4.1

(3.1)

FX

0.0

0.0

0.0

0.0

Other non-cash movements

(4.9)

(4.7)

4.2

0.0

Closing net debt/(cash)

 

 

1.4

4.1

(3.1)

(0.8)

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.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

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Germany

London +44 (0)20 3077 5700

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United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

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United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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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

1185 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

General disclaimer and copyright

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.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 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

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

1185 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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