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.
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.
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.
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.