Hot25 Nov 2015 08:46
Hot i am back in ETO at 205 but more on fundamentals than techs
Filmgoers flocked to Jurassic World and other blockbusters this summer instead of lower-budget films such as Southpaw and The Age of Adaline, weighing on Entertainment One (ETO). The film and TV distributor and producer reported underlying cash profits of £52.3m for the six months to September - down 5 per cent, adjusting for acquisitions, despite strong television sales.
Pro-forma film revenues slid 13 per cent as Entertainment One's film studio partners delayed releases to avoid being crowded out by crowd-pleasers. The group rolled out just 96 films into theatres, down from 134. The corollary is that it should benefit from a stronger second-half slate that includes The Hateful Eight and the final installment of The Hunger Games. Management also renewed a multi-year deal with Amazon Instant Video to offer all new releases on the streaming platform.
In the TV business, underlying cash profits leapt a quarter to £42.4m - four-fifths of the group total - as the division produced more series and acquired the sixth season of The Walking Dead through an exclusive deal with AMC. Management also launched Peppa Pig on Chinese television and expects to license out broadcasting and merchandising rights in 2016.
Broker Numis expects EPS of 19.8p in the current financial year, rising to 21.9p in the year to March 2017 (FY 2015: 20.6p).
ENTERTAINMENT ONE (ETO)
ORD PRICE: 232p MARKET VALUE: £991m
TOUCH: 231.7-232.4p 12-MONTH HIGH: 328p LOW: 210p
DIVIDEND YIELD: 0.5% PE RATIO: 13
NET ASSET VALUE: 84p* NET DEBT: 86%
Half-year to 30 Sep Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2014 331 2.4 0.4 nil
2015 337 18.1 4.6 nil
% change +2 - - -
*Includes intangible assets of £391m, or 91p a share
IC VIEW:
Entertainment One is making savvy acquisitions, expanding internationally and striking key partnerships. Moreover, both its film and TV businesses should benefit from broadcasters' insatiable appetite for exclusive content. The shares are down on our summer buy tip (327p, 16 Jul 2015) and now trade on just 12 times forecast earnings, undervaluing the group's growth potential. Buy.Last IC view: Buy, 248p, 30 Sep 2015