Pantaflix — Content and distribution

Pantaflix (DB: PAL)

Last close As at 21/11/2024

1.35

0.03 (1.89%)

Market capitalisation

25m

More on this equity

Research: TMT

Pantaflix — Content and distribution

Pantaflix’s first half results show a marked reduction in the EBITDA loss, from €3.1m in H118 to €1.1m for the period, benefiting from lower operating expenses. The new corporate strategy put in place earlier in the year broadens the potential revenue streams, both in terms of channels to market and in the breadth of content. Management guidance suggests a significant improvement in EBIT and earnings in H219, with consensus forecasts suggesting that the group should move into profit in FY21.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

Pantaflix

Content and distribution

Media & technology

Scale research report - Update

10 October 2019

Price

€1.63

Market cap

€25m

Share price graph

Share details

Code

PAL

Listing

Deutsche Börse Scale

Shares in issue

15.4m

Last reported net cash at H119

€4.1m

Business description

Pantaflix is a European media group. It consists of the VoD platform Pantaflix, the film production division (Pantaleon Films and Pantaleon Pictures), the music label PantaSounds, the brand integration unit March & Friends and the creative agency Creative Cosmos 15.

Bull

SVoD, AVoD opportunities significant.

Strong production/launch slate.

Path back to profit outlined.

Bear

Profitability now projected in FY21 (was FY20).

Project risk on film/series production.

Low liquidity in shares.

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Russell Pointon

+44 (0)20 3077 5757

Pantaflix’s first half results show a marked reduction in the EBITDA loss, from €3.1m in H118 to €1.1m for the period, benefiting from lower operating expenses. The new corporate strategy put in place earlier in the year broadens the potential revenue streams, both in terms of channels to market and in the breadth of content. Management guidance suggests a significant improvement in EBIT and earnings in H219, with consensus forecasts suggesting that the group should move into profit in FY21.

Management team further strengthened

Following the appointment of Nicolas Paalzow as CEO in January 2019, the group has now appointed a CFO, Eerik Budarz. He has been with the company for a while in various roles, and has a background in IR and investment banking. With a new COO in place since the spring, Paalzow’s vision for the group is already being implemented. Some elements are ahead of schedule, in particular the addition of SVoD and AVoD capability to the distribution platform. The AVoD channel is set to go into beta phase imminently – timely as the domestic AVoD market is set to grow in double digits over the next five years (source: Statista). White labelling for third parties on the platform will also drive revenues.

Content slate broadening

The focus in the current financial year in the group’s content production arm is on scaling up successful in-house film and TV series’ productions. The fourth and fifth seasons of Krass Klassenfahrt will be aired on the AVoD platform on its launch, having previously streamed on the Joyn platform. This production is with highly successful social media personalities, with a reach of around seven million between them. The production company has three major releases scheduled for H219: Abikalypse, Dem horizont so nah and Auerhaus. The first series for Netflix, The Last Word, announced earlier in the year, is for six 45-minute episodes. This, and previous successful release, Resistance, emphasise that Pantaflix’s ambitions reach beyond its domestic market.

Valuation: Production overshadowed by VoD

The group’s EV of c €21m suggests the market is not yet convinced that the VoD strategy will pay off. It also implies a very low valuation for the production business, in a market where the major channels are hungry for quality content as they compete for viewer share.

Adjusted consensus estimates

Year
end

Revenue
(€m)

PBT
(€m)

GAAP EPS
(€)

DPS
(€)

P/E
(x)

EV/EBIT
(x)

12/17

28.1

2.2

(0.28)

0.0

N/A

N/A

12/18

35.1

(9.0)

(0.64)

0.0

N/A

N/A

12/19e

38.4

(2.6)

(0.21)

0.0

N/A

N/A

12/20e

42.5

(1.6)

(0.11)

0.0

N/A

57.8

Source: Pantaflix, Refinitiv

Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.

Review of H119 results

The group does not split out performance of the production and distribution elements of the business, making it difficult to comment on their relative dynamics. H119 revenues were up by 5% on H118, despite some slippage of the expected revenue into H219, with timing on this type of large film project always difficult to predict.

Exhibit 1: Summary of results

€m

H118

H119

% change

INCOME STATEMENT

Revenue

13.8

14.5

+5

Increase (decrease) in working capital

(6.3)

(8.3)

+32

Other own work capitalised

0.0

0.2

Other operating income

0.5

0.9

+80

Gross revenues

8.1

7.3

-10

Cost of purchased services

(5.0)

(3.6)

-28

Gross profit

3.1

3.7

+19

Opex

(6.2)

(4.8)

+23

D&A

(1.2)

(5.2)

+331

EBIT loss

(4.3)

(6.3)

+47

EBITDA loss

(3.1)

(1.1)

-65

Profit Before Tax (as reported)

(4.3)

(6.3)

+47

Net income (as reported)

(4.4)

(6.3)

+47

EPS (as reported) (€)

(0.31)

(2.44)

+687

BALANCE SHEET

End FY18

End H119

Total non-current assets

8.5

7.6

Total current assets

31.8

10.4

Total assets

40.3

18.1

Total current liabilities

(23.2)

(14.8)

Total non-current liabilities

(0.0)

(0.2)

Total liabilities

(23.2)

(14.8)

Total Equity

17.1

3.1

Source: Company accounts, Edison Investment Research

Swings in working capital and higher input costs meant lower gross revenue, but reductions in other operating expenses more than offset a 17% increase in personnel costs, reducing the EBITDA loss from €3.1m in H118 to €1.1m in this latest reported half year.

No cash flow statement was provided for the period, but a net cash outflow reduced the net cash balance from €9.0m at the end of December 2018 to €4.1m at the half year, being €9.1m of cash less €5.0m of bank debt (which relates to production finance).

Operating update

Repurposing the VoD platform

The earlier VoD strategy was centred on providing content to consumers using a transactional business model only. The new approach looks at a much broader model, where the group will need to carve out a role in a market dominated by Netflix in SVoD and YouTube in AVoD. Third-party white-label and the commercial B2B2C opportunities may be the more effective route, particularly given that the group has an in-house marketing agency. The cash on the balance sheet gives the benefit of some time to trial options to determine where efforts are best focused.


Continued content expansion

The film production business is inevitably uneven, although some of the risks can be offset by pre-sales and minimum guarantees.

With major industry partners such as Warner Brothers, the group has produced two seasons of You are Wanted and has recently been commissioned for its first series for Netflix, The Last Word, which will consist of six 45-minute episodes. With the rapid development of the VoD market (both in terms of growth and on corporate activity), demand for high-quality content that can drive viewers onto each platform is currently strong.

The group’s majority-owned subsidiaries, PantaSounds (57.5%-owned) and Creative Cosmos 15 (51%-owned) are also progressing. The former is releasing a second album from Matthias Schweighöfer, who joined the group in the spring, with a possible tour being put together for FY20. The latter continues to work with Daimler and has been adding new business with other clients.

Forecasts and valuation

The shares fell back from a high of €3.07 in June 2019 to €1.69 in August. Since that time, they have drifted back to current levels of around €1.7/share.

The current year EV/Sales ratio is 0.5x, well below the level of relevant media peers on 1.6x sales. However, the company is yet to reach profitability. Given the uneven nature of the film business, even this is not a particularly satisfactory measure of relative valuation. Although the relative performance of the different aspects of the group’s business is not split out, it is likely that the market’s appraisal of the value of the platform potential is weighing heavily on the group.

Management is guiding that, although revenues can vary according to the timing of delivery of projects, it expects that H219 will generate a ‘significant improvement’ in EBIT and earnings.

Exhibit 2: Peer multiples

Name

Market cap (m)

Sales growth 1FY (%)

Sales growth 2FY (%)

EV/Sales 1FY (x)

EV/Sales 2FY (x)

EV/EBIT 1FY (x)

EV/EBIT 2FY (x)

P/E 1FY (x)

P/E 2FY (x)

Div yield 1FY (%)

Pantaflix (€)

25

9

11

0.5

0.5

N/A

N/A

N/A

N/A

0.0

Eros International ($)

161

3

15

1.7

1.5

6.8

6.0

2.8

2.5

0.0

Entertainment One (£)

2,808

21

7

2.9

2.7

17.4

15.5

20.8

18.4

0.3

Lions Gate Ent. ($)

1,882

4

6

1.4

1.3

24.6

20.6

100.6

31.1

0.0

Mondo TV (€)

40

11

29

1.6

1.3

5.9

4.5

10.5

8.5

0.0

Prosiebensat.1 Media (€)

2,832

4

4

1.3

1.3

7.8

7.5

6.3

6.1

8.7

Highlight Comms (€)

262

0

6

0.9

0.9

14.9

12.7

12.9

11.9

4.4

Average

7

11

1.6

1.5

12.9

11.1

10.7

9.5

2.2

Source: Refinitiv, Edison Investment Research. Note: Priced as at 9 October 2019. Average excludes Pantaflix and outlier.

Between them, BlackMars Capital, the management team and the founding shareholders (Marco Beckmann, Dan Maag and Matthias Schweighöfer) own around 50% of the shares. Austrian entrepreneur, Klemens Hallmann, was elected to the Supervisory Board in July 2019 and holds a 13% stake. The free float is 37%.


General disclaimer and copyright

Any Information, data, analysis and opinions contained in this report do not constitute investment advice by Deutsche Börse AG or the Frankfurter Wertpapierbörse. Any investment decision should be solely based on a securities offering document or another document containing all information required to make such an investment decision, including risk factors. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally.

Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

This paragraph mark is needed to maintain formatting, please leave this text for the editors.

More on Pantaflix

View All

Latest from the TMT sector

View All TMT content

Research: Industrials

Polypipe — Clear fit from bolt-on deal

The highly complementary £14m acquisition of Alderburgh expands Polypipe’s stormwater management portfolio offering, adding design and installation capabilities also. The earnings impact is modest but this serves as a further strengthening of Polypipe’s market position in the relatively robust infrastructure segment. Once wider UK economic uncertainties clear, we expect increased support for Polypipe’s share price.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free