DHX Media is still undervalued, says Jacob Securities

Jacob Securities analyst Sameet Kanade says DHX Media’s (DHX Media Stock Quote, Chart, News: TSX:DHX) integration of Cookie Jar Entertainment is going better than he expected.

Yesterday, before market open, DHX reported its Q3, 2013 financial results. The company earned $906,000 on revenue of $31.23-million, which was up 88% from the $16.62-million topline the company posted in the third quarter of fiscal 2012.

CEO Michael Donovan said Cookie Jar was now fully integrated.

“We are very pleased to announce our third quarter financial results, the first with a full contribution from our Cookie Jar acquisition,” he said. “Not only did we achieve record levels of adjusted EBITDA but we have also met our revised synergy target of $10-million. The business was propelled by sales from our library of 8,500 half hours of kids programming to new and emerging digital channels which continue to proliferate.”

Kanade said the Q3 results bested his expectations across the board. He says concerns surrounding the lack of visibility on traction within the digital distribution is valid, but DHX is now on a very strong footing to drive revenue growth driven through an increase in digital distribution revenue. The Jacob Securities analyst says investors should take advantage of any dips in the stock to build or add to positions ahead of fiscal 2014. In a research update to clients this morning, Kanade reiterated his BUY recommendation and one-year target price of $3.50 per share on DHX Media.

Last August, the Halifax-based DHX made a splash when it 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. The company’s properties now include Inspector Gadget, Yo Gabba Gabba!, and Dennis the Menace.

Shares of DHX Media closed today up 2.8% to $2.97.

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