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Northern Securities analyst Sameet Kanade initiates coverage of DHX Media with $2.50 target

With the acquisition of Cookie Jar Entertainment, DHX Media added 8,500 half hours of premium programming, including Inspector Gadget. Northern Securities analyst Sameet Kanade says this has created a “major powerhouse” in children’s programming.
On August 20th, Halifax-based children’s entertainment company DHX Media (TSX:DHX) made a splash. The company announced it would acquire peer Cookie Jar Entertainment for $111-million.

The move instantly created Canada’s largest children’s entertainment company, and made DHX the top supplier of children’s programming to Netflix.

Northern Securities analyst Sameet Kanade says the marriage of DHX and Cookie Jar has created “a major powerhouse”. He believes digital access and distribution have become an increasingly important element of any execution strategy in the space, and DHX has undertaken several key initiatives to create a larger digital footprint. This morning, in a report to clients, Kanade initiated coverage of DHX Media with a BUY recommendation and a $2.50 target price.

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Founded in 2006, DHX Media boasts a library of over 2,525 half-hours of film and television, including Animal Mechanicals, Rastamouse, Angela Anaconda and the hit Yo Gabba Gabba! The company has quietly become a leader in kids TV. DHX has signed more than 1,200 license deals with over 150 children’s networks worldwide, including the BBC, Cartoon Network, PBS, The Disney Channel and Nickelodeon. On May 14th, DHX reported its Q3, 2012 results. Revenue was up 35% to $16.6-million from $12.3-million in the same period in 2011.

Toronto-based Cookie Jar, formerly know as Cinar, was founded in 1976 and owns titles such as Caillou, Inspector Gadget, Kung Fu Dino Posse and Johnny Test.

Kanade says while DHX is still small and relatively unknown, its business model mirrors the most successful in the industry, including that of Disney, which is to create a strong library of content that can be refreshed periodically to create recurring revenue. He says this model kicks into high gear when a hit -such as the one DHX had with Yo Gabba Gabba! -produces merchandising and licensing opportunities.

Shares of DHX Media closed today down .7% to $1.48.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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