In today's trading update TV and film business Entertainment One (ETO) says its library valuation rose from $1.5bn to $1.7bn, driven by kids animated series PJ Masks and political drama Designated Survivor in the half year to 30 September.
Edison’s Bridie Barrett says Entertainment One could be undervalued as 80% of its market valuation is underpinned by its library assets – leaving little for the value of the production and sales network.
The analyst is supportive of the distribution firm’s strategy of producing rather than acquiring content.
Barrett also highlights the growing momentum of Peppa Pig in newer territories, highlighting that initial retail sales in China are exceeding expectations.
Investec’s Steve Liechti is leaving profit expectations unchanged despite a cut in anticipated content from its TV division from 1,000 to 900 hours.
However, Liechti says the cut implies lower but higher-margin sales.
BIG DROP IN BOX OFFICE
On the film side Entertainment One reported a sharp drop in overall year-to-date box office revenues, which have nearly halved from $151m to $82m.
The company says the fall in sales reflects the ‘lower profile’ and decline in the number of releases in 2017, but is upbeat about a stronger film slate in the second half.
These include upcoming films including The Post, Paddington 2 and Molly’s Game.
Despite the update being in line with full year expectations, shares in Entertainment One are down 1.8% to 253.2p. It currently trades on a forecast 12 time earnings per share in the year to 31 March 2018.