Five weeks after fighting off a takeover approach from ITV (ITV), film and TV rights specialist Entertainment One (ETO) has reported a 50% increase in the value of its content library to $1.5 billion (£1.15 billion), according to an independent assessment.

The value of this library is nearly the same as the company’s £1.2 billion enterprise value which includes production finance. ‘(This leaves) little in the rating for its extensive production and sales network,’ says research group Edison.

The main uplift in the valuation is down to Entertainment One taking a bigger share of the Peppa Pig brand when it bought 70% of production group and Peppa Pig creator Astley Baker Davies a year ago. A strong underlying performance in its Family division has also contributed to the library value hike.

Alongside the announcement is confirmation that trading is in line with expectations. In particular, merchandise sales using the Peppa Pig brand and characters are ahead of plan in the US.

The pre-school show is also proving a big hit in China where it has surpassed 6m views on local on-demand platforms iQIYI, Youku and Tudou since launching in October 2015. Peppa Pig toys have also now been launched in China.

Investors have often wondered whether the Peppa Pig brand might soon lose appeal. The trading update clearly shows this is not the case with further geographical expansion plausible, in our opinion.

That said, it is important for Entertainment One to always have a pipeline of new projects to try and find ‘the next Peppa’, both in terms of TV viewers and merchandise potential.

A few years ago the FTSE 250 constituent put its faith in a French picture book series called Les Pyjamasques as something that could be exploited on an international scale.

It changed the name to PJ Masks and backed a cartoon series about three young friends who transform into their super hero alter egos, Catboy, Owlette and Gekko, when they put their pyjamas on at night.

Today Entertainment One says the show is delivering strong audience figures in the US and various overseas territories including the UK, France, Italy, Spain and Australia. It has already commissioned a second cartoon series.

It will launch PJ Masks merchandise later this year in the US via an exclusive tie-up with Toys “R” Us before expanding to other retailers next year.

On the film side of the business, it enjoyed a monster hit in the UK with The BFG which took £30 million at the box office over the summer.

The next big catalyst for the shares is likely to be half year results published on 22 November 2016.


Issue Date: 30 Sep 2016