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Research: TMT
Mondo TV posted a strong Q3 performance, with production value for 9M21 up 32% on the prior year and EBIT ahead by 20%. Encouragingly, the progress is across several key properties. A further 13 episodes of Disco Dragon were delivered by Mondo France in Q3, while Grisù, Agent 203 and Meteoheroes all continue to perform strongly. Properties in earlier stages of development are also building traction. The group is on track to meet its business plan projections and our forecasts are unchanged. The valuation remains at a significant discount to global peers.
Mondo TV |
Disco Dragon has all the moves |
Q3 results |
Media |
16 November 2021 |
Share price performance
Business description
Next events
Analyst
Mondo TV is a research client of Edison Investment Research Limited |
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Mondo TV posted a strong Q3 performance, with production value for 9M21 up 32% on the prior year and EBIT ahead by 20%. Encouragingly, the progress is across several key properties. A further 13 episodes of Disco Dragon were delivered by Mondo France in Q3, while Grisù, Agent 203 and Meteoheroes all continue to perform strongly. Properties in earlier stages of development are also building traction. The group is on track to meet its business plan projections and our forecasts are unchanged. The valuation remains at a significant discount to global peers.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
EV/EBIT |
P/E |
12/19 |
23.1 |
6.2 |
11.3 |
0.0 |
6.6 |
12.2 |
12/20 |
24.7 |
6.4 |
13.2 |
0.0 |
5.0 |
10.5 |
12/21e |
29.2 |
9.1 |
14.6 |
0.0 |
4.5 |
9.5 |
12/22e |
31.3 |
10.2 |
18.3 |
0.0 |
4.0 |
7.5 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Studio's investment paying off
The reverse takeover of the group’s Spanish subsidiary by that based in the Canary Islands is now complete, with the resulting Tenerife-based entity named Mondo TV Studios. This will be a more efficient structure and easier to market as an animation and pre-production facility to the industry, upgraded by previous investment. In Q3, Mondo TV Studios won the animation work for a new series for the Latin American market, Nivis, amigos de otro mundo, and the animation and pre-production for One Love, for T-Rex Digimation, for which the group will arrange worldwide distribution (excluding Italian-speaking territories and the Indian subcontinent). Studios is also to provide pre-production and artistic direction for Letrabots, for Cicaboom, with Mondo arranging animation and post-production for the project, for which it will be entitled to 40% of the resulting IP.
Balance sheet supports development
The balance sheet was secured with the conversion of the final Atlas bonds (see Outlook note), enabling the investment needed to bring multiple projects through to commercial realisation. Investment of €5.8m in Q321 takes the year-to-date total to €20.8m, with our full year estimate standing at €27.7m. This heightened level of investment obviously increases amortisation charges but lays the ground for driving the revenue line over the short to medium term. Net debt at end September was €5.2m, from €3.6m at the half year. We now expect year-end net debt of €2.0m.
Valuation: Deep discount persists
Parity to global peers on averaged earnings multiples across FY21 and FY22 would imply a value of €3.19/share, from €3.54 in September, since when peers’ share prices have slipped back. A DCF (WACC of 11.5%, terminal growth 2%) suggests a price of €2.06/share (was €2.03). The midpoint of these is €2.61/share (was €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.
Good progress continues
The table below splits out the progress made on a quarterly and a nine-month basis over the prior year. The good momentum continued into Q321, with a number of property and licensing deals, some of which are outlined above. The value of the existing library is easy to overlook but it is a useful asset, as shown by the latest deal to license around 20 earlier series in Albania, where the group had no active trading relationships prior to this deal.
Operating costs appear to be well under control, with the group having targeted €1.5m of savings over 12 months at the interim stage. This is within the scope of our forecasts.
Exhibit 1: Mondo TV Group results summary
€m |
H121 |
% change on H120 |
Q321 |
% change on Q320 |
9M21 |
% change |
Revenue |
15.0 |
+33 |
7.2 |
+37 |
22.1 |
+35 |
Capitalised content development |
2.5 |
+48 |
0.9 |
-28 |
3.4 |
+16 |
Production value |
17.5 |
+35 |
8.1 |
+25 |
25.6 |
+32 |
Operating costs |
(5.5) |
+18 |
(2.1) |
-16 |
(7.5) |
+5 |
EBITDA |
12.1 |
+45 |
6.0 |
+52 |
18.1 |
+47 |
D&A (including exceptionals) |
(7.9) |
+66 |
(4.2) |
+62 |
(12.1) |
+67 |
EBIT |
4.2 |
+17 |
1.8 |
+24 |
6.0 |
+20 |
Net financial costs |
0.3 |
N/A |
0.5 |
N/A |
0.8 |
N/A |
PBT |
4.5 |
+33 |
2.3 |
+65 |
6.8 |
+42 |
Tax |
(1.3) |
+14 |
(0.7) |
+75 |
(2.0) |
+29 |
Minorities |
(0.3) |
N/A |
(0.1) |
N/A |
0.3 |
N/A |
Net profit |
2.9 |
+16 |
1.6 |
+41 |
4.5 |
+24 |
Source: Mondo TV accounts, Edison Investment Research. Note: May not tally due to rounding.
Valuation
Exhibit 2: Peer group valuations
Quoted |
Current |
Market |
ytd |
P/E |
EV/Sales |
EV/EBITDA |
EV/EBIT |
||||||||
Name |
currency |
price |
cap (m) |
perf. (%) |
Last (x) |
1FY (x) |
2FY (x) |
Last (x) |
Last (x) |
1FY (x) |
2FY (x) |
Last (x) |
1FY (x) |
2FY (x) |
|
Xilam Animation |
EUR |
40.30 |
196 |
-14 |
74.2 |
28.1 |
21.8 |
10.4 |
14.9 |
6.4 |
5.1 |
53.7 |
21.7 |
17.3 |
|
Mediawan |
EUR |
12.00 |
370 |
0 |
17.3 |
N/A |
N/A |
1.9 |
12.1 |
N/A |
N/A |
15.2 |
N/A |
N/A |
|
Lions Gate Ent |
USD |
17.41 |
3,709 |
53 |
N/A |
N/A |
79.2 |
2.2 |
13.3 |
16.1 |
13.4 |
N/A |
66.7 |
33.6 |
|
Toei |
JPY |
18,150 |
742,311 |
124 |
64.5 |
63.3 |
59.0 |
13.9 |
44.6 |
42.3 |
40.8 |
N/A |
N/A |
N/A |
|
Corus Ent |
CAD |
5.73 |
1,174 |
34 |
6.4 |
6.4 |
6.3 |
1.8 |
5.3 |
5.1 |
5.1 |
7.5 |
7.1 |
7.0 |
|
Spin Master |
CAD |
47.98 |
1,523 |
65 |
75.0 |
21.4 |
19.7 |
0.6 |
5.1 |
2.5 |
2.4 |
10.7 |
3.8 |
3.5 |
|
Amuse |
JPY |
2,242 |
39,007 |
-13 |
22.5 |
N/A |
N/A |
0.4 |
4.2 |
N/A |
N/A |
N/A |
N/A |
N/A |
|
Boat Rocker |
CAD |
7.00 |
241 |
-20 |
N/A |
15.2 |
13.2 |
1.1 |
N/A |
9.3 |
3.1 |
N/A |
N/A |
4.4 |
|
Average |
29 |
43.3 |
26.9 |
33.2 |
4.0 |
14.2 |
13.6 |
11.6 |
21.8 |
24.8 |
13.2 |
||||
Median |
17 |
43.5 |
21.4 |
20.7 |
1.9 |
12.1 |
7.8 |
5.1 |
13.0 |
14.4 |
7.0 |
||||
Mondo TV |
EUR |
1.33 |
60 |
0 |
10.5 |
9.5 |
7.5 |
1.7 |
2.3 |
1.7 |
1.6 |
5.0 |
4.5 |
4.0 |
|
Discount to Median |
76% |
56% |
64% |
6% |
81% |
79% |
69% |
62% |
69% |
43% |
|||||
Source: Refinitiv. Note: Prices as at 12 November 2021.
The global children’s content, animation and licensing peer group is very broad and their success or otherwise depends heavily on their IP portfolios. Given the range of activity and the high investment levels needed to drive revenues, we would view EV/EBIT as the most useful of these earnings metrics. Here, Mondo TV is clearly trading at a significant discount, in part reflecting its much smaller scale.
Exhibit 3: Financial summary
€'m |
2018 |
2019 |
2020 |
2021e |
2022e |
||
31-December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||
Revenue |
|
|
18.9 |
23.1 |
24.7 |
29.2 |
31.3 |
Production value |
22.2 |
26.7 |
30.4 |
34.9 |
36.9 |
||
Cost of Sales |
(7.7) |
(6.6) |
(5.9) |
(3.4) |
(3.9) |
||
Gross Profit |
11.2 |
16.4 |
18.8 |
25.8 |
27.4 |
||
EBITDA |
|
|
11.2 |
16.4 |
18.8 |
25.8 |
27.4 |
Operating Profit (before amort. and except.) |
|
|
(30.6) |
6.5 |
8.7 |
9.6 |
10.7 |
Amortisation of acquired intangibles |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
(23.9) |
(0.2) |
(0.4) |
0.0 |
0.0 |
||
Share-based payments |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Reported operating profit |
(54.5) |
6.3 |
8.3 |
9.6 |
10.7 |
||
Net Interest |
0.5 |
(0.3) |
(2.4) |
(0.5) |
(0.5) |
||
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) |
|
|
(30.1) |
6.2 |
6.4 |
9.1 |
10.2 |
Profit Before Tax (reported) |
|
|
(54.0) |
6.0 |
6.0 |
9.1 |
10.2 |
Reported tax |
11.5 |
(2.1) |
(2.0) |
(2.7) |
(3.2) |
||
Profit After Tax (norm) |
(22.0) |
4.1 |
4.6 |
6.6 |
7.4 |
||
Profit After Tax (reported) |
(42.5) |
3.9 |
3.9 |
6.4 |
7.1 |
||
Minority interests |
3.0 |
(0.1) |
0.4 |
(0.5) |
0.6 |
||
Discontinued operations |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net income (normalised) |
(19.0) |
4.0 |
5.0 |
6.1 |
8.0 |
||
Net income (reported) |
(39.5) |
3.8 |
4.4 |
5.9 |
7.7 |
||
Average Number of Shares Outstanding (m) |
34 |
35 |
38 |
42 |
44 |
||
EPS - normalised (c) |
|
|
(56.3) |
11.3 |
13.2 |
14.6 |
18.3 |
EPS - normalised fully diluted (c) |
|
|
(56.3) |
11.3 |
13.2 |
14.6 |
18.3 |
EPS - (c) |
|
|
(117.0) |
10.8 |
11.4 |
14.1 |
17.6 |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Revenue growth (%) |
(40.9) |
21.9 |
7.1 |
18.4 |
6.9 |
||
EBITDA Margin on production value (%) |
50.4 |
61.4 |
62.0 |
74.0 |
74.2 |
||
Normalised Operating Margin on production value (%) |
(138.1) |
24.4 |
28.7 |
27.6 |
29.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
45.9 |
50.5 |
59.1 |
70.2 |
79.3 |
Intangible Assets |
30.9 |
35.8 |
44.8 |
56.8 |
65.8 |
||
Tangible Assets |
0.3 |
1.6 |
1.2 |
0.9 |
1.0 |
||
Investments & other |
14.7 |
13.1 |
13.1 |
12.5 |
12.5 |
||
Current Assets |
|
|
37.2 |
35.7 |
43.6 |
43.5 |
45.0 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors |
20.6 |
24.9 |
30.7 |
29.1 |
30.5 |
||
Cash & cash equivalents |
12.5 |
8.0 |
9.9 |
12.8 |
13.0 |
||
Other |
4.2 |
2.8 |
3.0 |
1.6 |
1.6 |
||
Current Liabilities |
|
|
(25.2) |
(19.9) |
(23.7) |
(24.6) |
(24.6) |
Creditors |
(21.6) |
(13.8) |
(14.6) |
(13.5) |
(14.5) |
||
Tax and social security |
(0.5) |
(0.8) |
(3.6) |
(4.2) |
(3.1) |
||
Short term borrowings |
(3.0) |
(5.3) |
(5.3) |
(6.8) |
(6.8) |
||
Other |
(0.1) |
(0.0) |
(0.2) |
(0.2) |
(0.2) |
||
Long Term Liabilities |
|
|
(1.9) |
(4.7) |
(9.6) |
(8.9) |
(8.9) |
Long term borrowings |
(1.3) |
(4.1) |
(8.8) |
(8.1) |
(8.1) |
||
Other long term liabilities |
(0.6) |
(0.6) |
(0.8) |
(0.8) |
(0.8) |
||
Net Assets |
|
|
56.0 |
61.6 |
69.3 |
80.1 |
90.8 |
Minority interests |
2.1 |
(1.2) |
(0.7) |
(0.8) |
(0.7) |
||
Shareholders' equity |
|
|
58.1 |
60.4 |
68.6 |
79.4 |
90.1 |
CASH FLOW |
|||||||
Op Cash Flow before WC and tax |
11.2 |
16.4 |
17.0 |
25.3 |
27.4 |
||
Working capital |
6.0 |
(10.6) |
(2.5) |
1.9 |
(0.3) |
||
Exceptional & other |
(11.0) |
1.4 |
(0.4) |
1.1 |
0.0 |
||
Tax |
11.5 |
(2.1) |
(2.0) |
(3.4) |
(3.9) |
||
Operating cash flow |
|
|
17.6 |
5.1 |
12.1 |
24.9 |
23.2 |
Capex |
(28.6) |
(14.2) |
(18.7) |
(27.7) |
(25.2) |
||
Acquisitions/disposals |
0.0 |
(0.1) |
0.0 |
0.0 |
0.0 |
||
Net interest |
0.0 |
2.9 |
4.8 |
(0.5) |
(0.5) |
||
Equity financing |
20.9 |
1.8 |
3.8 |
6.2 |
0.0 |
||
Dividends |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net Cash Flow |
10.0 |
(4.5) |
2.0 |
2.9 |
(2.5) |
||
Opening net debt/(cash) |
|
|
2.0 |
(8.0) |
1.4 |
4.1 |
2.0 |
FX |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other non-cash movements |
0.0 |
(4.9) |
(4.7) |
(0.9) |
0.0 |
||
Closing net debt/(cash) |
|
|
(8.0) |
1.4 |
4.1 |
2.0 |
4.5 |
Source: Company accounts, Edison Investment Research
|
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