DHX Media is undervalued, says Canaccord Genuity

Ahead of the company’s fourth quarter results, Canaccord Genuity analyst Aravinda Galappatthige remains bullish on DHX Media (DHX Media Stock Quote, Chart, News: TSX:DHX).

On September 28, before the market open, DHX will report its fourth quarter and fiscal 2017 results. Galappatthige thinks the company will post Adjusted EBITDA of $37.35-million on revenue of $98.62-million, a topline that would be up 31 per cent over the same period last year. The street consensus is a little higher than that, at EBITDA of $40.1-million on a topline of $101.4-million.

But Galappatthige says he will be watching manaagement’s guidance as closely as these results.

“While the Q4 result could impact sentiment near term, the focus is likely to be on F2018 guidance which would include a full-year contribution from the Iconix entertainment division assets (80% interest in Peanuts and 100% of Strawberry Shortcake),” the analyst says. “Recall, the transaction closed on June 30, 2017. As a result, the Q4/17 balance sheet would reflect the new assets and the full financing. Our revised 2018E of $478.5M in revenue and $151.3M in adj EBITDA implies 3.3% organic revenue growth (Ex Peanuts + Strawberry Shortcake) and 5.2% adj EBITDA growth (organic). The moderation in our F2018E reflect the stronger USD and revised down expectations around Teletubbies M&L. We also expect improved F2018 FCF guidance, given initial management commentary around streamlining the production slate. We are currently calling for $38.9M in FCF.”

In a research update to clients today, Galappatthige maintained his “Buy” rating and one-year price target of $9.00 on DHX Media.

Galappatthige thinks DHX will generate EBITDA of $101-million on revenue of $310-million in fiscal 2017. He expects those numbers will improve to EBITDA of $151.3-million on a topline of $478-million the following year.

More Cantech Analysts