Splendid Medien AG

First Take - Profit warning

Broadcasting | Germany

Est.chg

2016e

2017e

EPS

-226,2%

-44,4%

Buy | Target price : 2.30 EUR vs 3.20 EUR

Price (12/09/2016) : 1.80 EUR | Upside : 28 %

$T ypCap$ 1583 12 1 1 x 6425 2

S

2nd profit warning this year; after cutting our EBIT estimates for 2017/2018e and our TP by ~30%; our new TP still leaves 28% upside; Buy reiterated

Publication date 12.12.2016 17:34

Writing date 12.12.2016 16:23

3,0

2,8

2,6

2,4

2,2

2,0

1,8

1,6

1,4

Sep 13Dez 13Mrz 14Jun 14Sep 14Dez 14Mrz 15Jun 15Sep 15Dez 15Mrz 16Jun 16Sep 16Dez 16

Splendid Medien AG Splendid Medien AG Relative to Media (Rebased)

Capital SPM GY | SPME.DE

Profit warning came by surprise, just 4 weeks after Q3 figures

On 8 December splendid medien very surprisingly reported a second profit warning this year, citing business in November and early December below its internal guidance - especially in the content segment. The sub-segments theatrical releases, home entertainment, licenses and tv- productions are fell short of revenue expectations. Furthermore, the company assumes lower exploitability from TV-licenses, leading it to write-down certain film assets, which also affected the P&L. To summarise, the company now projects 2016 revenues of € 50-53m and an EBIT loss of -€ 1.0m to -€ 1.5m. Its new revenue guidance is c.24%/€ 15m below its original revenue guidance for 2016 (using range mid-points); and its new EBIT guidance is € 5.75m below its original full-year EBIT guidance (mid-points). The timing of the profit warning - just 4 weeks after the Q3 results were released - was also very surprising. When we talked with management at that time, it was confident of reaching its then-current guidance (issued on 18 August, see table). The € 3m gap between the company's EBIT guidance on 18 August and 8 December can be broken down into: i) a weakish operational performance in Q4, as indicated by the ~9% reduction of its sales guidance, and ii) write-offs of film assets. Excluding the write- downs, we would expect operational EBIT at around break-even for 2016e. We now estimate 2016e revenues at € 50.6m (low end of guided range) and EBIT at € -1.2m (mid-point of range), leading to a net loss of € -1.6m.

Change in company guidance for 2016

Original guidance

1st profit warning on 18th August

2nd profit warning on 8 December

original guidance vs 2nd profit warning

Sales

64-69

55-59

50-53

-15m or -24%

EBIT

4-5

2-2,5

-1,0 to -1.5

-5.75m (mid points)

Market Cap (EURm)

18

Enterprise value (EURm)

26

Extrema 12 months

1,80

2,95

Free Float (%)

32,3

Performance (%)

1m

3m

12m

Absolute

-11,7

-15,9

-24,4

Perf. rel. Country Index

-15,6

-18,2

-22,5

Perf. rel. Media

-17,9

-14,8

-17,6

P&L

12/16e

12/17e

12/18e

Sales (EURm)

50,6

59,9

65,5

EBITDA (EURm)

23,8

22,6

25,6

Current EBIT (EURm)

-1,2

2,6

3,6

Attr. net profit (EURm)

-2

1,6

2,3

Adjusted EPS (EUR)

-0,17

0,16

0,23

Dividend (EUR)

0,10

0,10

0,10

P/E (x)

ns

11,1

7,7

P/B (x)

0,7

0,7

0,6

Dividend Yield (%)

5,6

5,6

5,6

FCF yield (%)

ns

10,8

5,3

EV/Sales (x)

0,52

0,42

0,38

EV/EBITDA (x)

1,1

1,1

1,0

EV/Current EBIT (x)

ns

9,8

7,0

Gearing (%)

33

28

27

Net Debt/EBITDA(x)

0,4

0,3

0,3

Source : Oddo Seydler Bank, Company Data

Given lack of visibility on 2017/2018, we cut our EBIT estimates by 30% as a precautionary measure

Next Events

Forecasting 2017 now becomes a quite uncertain exercise given that this was company's 2nd profit warning this year and given that it projects weak revenues and weak EBIT for Q4 16. We do not expect the company to issue guidance for 2017 until it publishes its annual report, normally at the end of March. We had updated our estimates for 2017e and 2018e after the first profit warning (on 8 August) and felt comfortable with them after the Q3 call with management. The magnitude of the company's Q4 weakness was a surprise, which would normally imply a weakish Q1 2017, too. 2016 is the company's first year with a large amount of postponements and delays in film production & releases. To be on the safe side, we lower our estimates for 2017e and 2018e by about 30% each on EBIT level due to a general lack of visibility. We also reduce our revenue estimates by c.5% for both years. We now forecast for 2017e revenues of € 59.9m and EBIT of € 2.6m, down from € 63.6m and € 4.3m, respectively. For 2018e we forecast revenues of € 65.5m with an EBIT of € 3.6m.

Valuation also down ~30%; current TP at € 2.30 for 28% upside; Buy

Post profit warning #2 the stock is now trading at c.€ 1.80. Prior to the second profit warning our TP was € 3.20, assuming 2017e EBIT of € 4.3m and € 5.5m for 2018e. We now assume 2017e/2018e EBIT € 2.6m/€ 3.6m. Including this 30% haircut on the operational level, we now derive a fair value per share of € 2.32. We therefore lower our TP from € 3.20/share to

Page 1/4

€ 2.30/share. As we expect earnings momentum to turn positive in 2017e and 2018e, the valuation currently looks undemanding (28% upside) and we reiterate our Buy rating.

Marcus Silbe, CEFA (Analyst)

+49 (69) 92 05 48 14

marcus.silbe@oddoseydler.com

Conflict of interests:

Oddo Securities, a division of Oddo et Cie, limited sharepartnership - Bank authorised by ACPR. Oddo & Cie and/or one of its subsidiaries could be in a conflict of interest situation with one or several of the groups mentioned in this publication. Please refer to the conflict of interests section at the end of this document.

Page 2/4

SPME.DE | SPM GY

Broadcasting | Germany

Buy

Upside

27,78%

Price 1.80EUR TP 2.30EUR

PER SHARE DATA (EUR)

12/11

12/12

12/13

12/14

12/15

12/16e

12/17e

12/18e

Adjusted EPS

0,52

0,37

0,37

0,09

0,30

-0,17

0,16

0,23

Reported EPS

0,52

0,37

0,37

0,09

0,30

-0,17

0,16

0,23

Growth in EPS(%)

-

-30,3%

2,1%

-75,4%

ns

ns

ns

43,5%

Net dividend per share

0,10

0,00

0,00

0,05

0,10

0,10

0,10

0,10

FCF to equity per share

0,43

-0,53

-0,25

-0,30

0,27

-0,15

0,19

0,09

Book value per share

2,06

2,33

2,60

2,57

2,82

2,65

2,71

2,84

Number of shares market cap

9,79

9,79

9,79

9,79

9,79

9,79

9,79

9,79

Number of diluted shares

9,79

9,79

9,79

9,79

9,79

9,79

9,79

9,79

VALUATION

12/11

12/12

12/13

12/14

12/15

12/16e

12/17e

12/18e

12m highest price

1,45

2,56

3,00

2,94

2,75

2,95

12m lowest price

0,59

1,32

2,10

1,65

1,92

1,80

(*) Reference price

1,09

2,02

2,46

2,41

2,31

1,80

1,80

1,80

Capitalization

10,7

19,8

24,1

23,6

22,6

17,6

17,6

17,6

Restated Net debt

-4,1

2,0

5,4

9,3

7,1

8,5

7,5

7,6

Minorities (fair value)

0,0

0,0

0,0

0,0

0,0

0,0

0,0

0,0

Financial fixed assets (fair value)

0,0

0,0

0,0

0,0

0,0

0,0

0,0

0,0

Provisions

0,0

0,0

0,0

0,0

0,0

0,0

0,0

0,0

Enterprise Value

6,6

21,7

29,5

32,8

29,7

26,1

25,1

25,2

P/E (x)

2,1

5,5

6,6

26,2

7,7

ns

11,1

7,7

P/CF (x)

0,8

1,2

1,3

1,0

1,0

0,7

0,8

0,7

Net Yield (%)

9,1%

0,0%

0,0%

2,1%

4,3%

5,6%

5,6%

5,6%

FCF yield (%)

39,4%

ns

ns

ns

11,9%

ns

10,8%

5,3%

P/B incl. GW (x)

0,53

0,87

0,95

0,94

0,82

0,68

0,66

0,63

P/B excl. GW (x)

0,53

0,87

0,95

0,94

0,82

0,68

0,67

0,63

EV/Sales (x)

0,16

0,43

0,54

0,50

0,52

0,52

0,42

0,38

EV/EBITDA (x)

0,4

1,3

1,5

1,4

1,3

1,1

1,1

1,0

EV/EBIT (x)

(*) historical average price

1,6

5,1

6,8

17,7

8,8

ns

9,8

7,0

PROFIT AND LOSS (EURm)

12/11

12/12

12/13

12/14

12/15

12/16e

12/17e

12/18e

Sales

41,8

50

55

66

57

51

60

65

EBITDA

15,5

16,6

20,2

23,9

23,7

23,8

22,6

25,6

Depreciations

-11,3

-12,3

-15,9

-22,0

-20,4

-25,0

-20,0

-22,0

Current EBIT

4,2

4,3

4,3

1,9

3,4

-1,2

2,6

3,6

Published EBIT

4,6

4,2

4,1

2,0

3,7

-1,2

2,6

3,6

Net financial income

-0,9

-0,8

-0,7

-0,6

-0,6

-0,6

-0,6

-0,6

Corporate Tax

1,4

0,2

0,3

-0,5

-0,2

0,2

-0,4

-0,7

Net income of equity-accounted companies

0,0

0,0

0,0

0,0

0,0

0,0

0,0

0,0

Profit/loss of discontinued activities (after tax)

0,0

0,0

0,0

0,0

0,0

0,0

0,0

0,0

Minority interests

0,0

0,0

0,0

0,0

0,0

0,0

0,0

0,0

Attributable net profit

5,1

3,6

3,7

0,9

2,9

-1,6

1,6

2,3

Adjusted attributable net profit

5,1

3,6

3,7

0,9

2,9

-1,6

1,6

2,3

BALANCE SHEET (EURm)

12/11

12/12

12/13

12/14

12/15

12/16e

12/17e

12/18e

Goodwill

0,3

0,3

0,3

0,3

0,3

0,3

0,3

0,3

Other intangible assets

0,4

0,4

0,4

0,3

0,3

0,1

0,1

0,0

Tangible fixed assets

10,8

19,7

24,1

28,0

25,7

23,5

29,1

33,3

WCR

8,5

7,4

10,6

10,7

12,6

15,8

10,2

7,9

Financial assets

4,9

6,5

6,3

6,7

6,7

6,1

6,1

6,1

Ordinary shareholders equity

20,2

22,8

25,5

25,1

27,6

25,9

26,5

27,8

Minority interests

0,0

0,0

0,0

0,0

0,0

0,0

0,0

0,0

Shareholders equity

20,2

22,8

25,5

25,1

27,6

25,9

26,5

27,8

Non-current provisions

8,9

9,5

10,8

11,8

11,0

11,5

11,8

12,2

Net debt

-4,1

2,0

5,4

9,3

7,1

8,5

7,5

7,6

CASH FLOW STATEMENT (EURm)

12/11

12/12

12/13

12/14

12/15

12/16e

12/17e

12/18e

EBITDA

15,5

16,6

20,2

23,9

23,7

23,8

22,6

25,6

Change in WCR

1,8

-2,1

0,1

-0,9

-1,0

-3,1

5,9

2,7

Interests & taxes

-0,9

-1,2

-1,1

-1,2

-1,0

-0,4

-1,0

-1,3

Others

-0,4

0,9

-0,4

-0,1

0,3

3,3

0,0

0,0

Operating Cash flow

16,0

14,3

18,8

21,7

22,1

23,6

27,5

27,0

CAPEX

-11,7

-19,5

-21,3

-24,7

-19,4

-25,1

-25,6

-26,1

Free cash-flow

4,2

-5,2

-2,5

-2,9

2,7

-1,5

1,9

0,9

Acquisitions / disposals

0,0

0,1

0,0

0,1

0,0

0,0

0,0

0,0

Dividends

0,0

-1,0

-1,0

-1,0

-0,5

0,0

-1,0

-1,0

Net capital increase

0,0

0,0

0,0

0,0

0,0

0,0

0,0

0,0

Others

0,2

2,4

1,2

3,0

-1,8

0,0

0,0

0,0

Change in net debt

4,2

-6,1

-3,4

-3,8

2,2

-1,5

0,9

-0,1

GROWTH MARGINS PRODUCTIVITY

12/11

12/12

12/13

12/14

12/15

12/16e

12/17e

12/18e

Sales growth

-

19,8%

9,6%

20,2%

-14,0%

-11,0%

18,5%

9,3%

Lfl sales growth

-

19,8%

9,6%

20,2%

-14,0%

-11,0%

18,5%

9,3%

Current EBIT growth

-

2,2%

0,8%

-56,9%

81,1%

ns

ns

39,8%

Growth in EPS(%)

-

-30,3%

2,1%

-75,4%

ns

ns

ns

43,5%

Net margin

12,3%

7,1%

6,7%

1,4%

5,2%

-3,3%

2,7%

3,5%

EBITDA margin

37,0%

33,1%

36,9%

36,1%

41,8%

47,1%

37,7%

39,1%

Current EBIT margin

10,0%

8,5%

7,9%

2,8%

5,9%

-2,4%

4,3%

5,5%

CAPEX / Sales

-28,1%

-39,0%

-38,7%

-37,4%

-34,1%

-49,7%

-42,7%

-39,8%

WCR / Sales

20,3%

14,8%

19,2%

16,2%

22,1%

31,2%

17,1%

12,0%

Tax Rate

-36,4%

-6,8%

-7,5%

36,4%

6,5%

9,4%

19,6%

24,0%

Normative tax rate

30,0%

30,0%

30,0%

30,0%

30,0%

30,0%

30,0%

30,0%

Asset Turnover

-

2,1

1,7

1,8

1,5

1,3

1,5

1,6

ROCE post-tax (normative tax rate)

-

12,5%

9,6%

3,5%

6,0%

-2,2%

4,5%

6,2%

ROCE post-tax hors GW (normative tax rate)

-

12,7%

9,7%

3,5%

6,1%

-2,2%

4,6%

6,3%

ROE

-

16,7%

15,2%

3,6%

11,1%

-6,1%

6,1%

8,4%

DEBT RATIOS

12/11

12/12

12/13

12/14

12/15

12/16e

12/17e

12/18e

Gearing

-21%

9%

21%

37%

26%

33%

28%

27%

Net Debt / Market Cap

-0,39

0,10

0,22

0,39

0,31

0,48

0,43

0,43

Net debt / EBITDA

ns

0,12

0,27

0,39

0,30

0,36

0,33

0,30

EBITDA / net financial charges

18,0

19,7

29,7

40,3

41,0

39,7

37,6

42,7

Mention of conflicts of interest
  • Valuation method

    Our target prices are established on a 12-month timeframe and we use three valuation methods to determine them. First, the discounting of available cash flows using the discounting parameters set by the Group and indicated on Oddo Securities' website. Second, the sum-of-the-parts method based on the most pertinent financial aggregate depending on the sector of activity. Third, we also use the peer comparison method which facilitates an evaluation of the company relative to similar businesses, either because they operate in identical sectors (and are therefore in competition with one another) or because they benefit from comparable financial dynamics. A mixture of these valuation methods may be used in specific instances to more accurately reflect the specific characteristics of each company covered, thereby fine-tuning its evaluation.

  • Our stock market recommendations

    Our stock market recommendations reflect the RELATIVE performance expected for each stock on a 12-month timeframe. Buy: performance expected to exceed that of the benchmark index, sectoral (large caps) or other (small and mid caps).

    Neutral: performance expected to be comparable to that of the benchmark index, sectoral (large caps) or other (small and mid caps). Reduce: performance expected to fall short of that of the benchmark index, sectoral (large caps) or other (small and mid caps).

  • The prices of the financial instruments used and mentioned in this document are the closing prices.

  • All publications by Oddo Securities or Oddo Seydler concerning the companies covered and mentioned in this document are available on the research site: www.oddosecurities.com

Recommendation and target price changes history over the last 12 months for the company analysed in this report

Date

Reco

Price Target (EUR)

Price (EUR)

Analyst

12.12.16

Buy

2,30

1,80

Marcus Silbe, CEFA

22.08.16

Buy

3,20

2,18

Marcus Silbe, CEFA

Recommendation split

Buy

Neutral

Reduce

Our whole coverage

(415)

48%

42%

10%

Liquidity providers coverage

(153)

52%

42%

7%

Research service coverage

(67)

63%

34%

3%

Investment banking services

(38)

66%

29%

5%

Risk of conflict of interest :

Investment banking and/or Distribution

Has Oddo Group, or Oddo & Cie, or Oddo Seydler managed or co-managed in the past 12 months a public offering of securities for the subject company/ies?

No

Has Oddo Group, or Oddo & Cie, or Oddo Seydler received compensation for investment banking services from the subject company/ies in the past 12 months or expects to receive or intends to seek compensation for investment banking services from the subject company/ies in the last 12 months?

No

Research contract between Oddo group & the issuer

Oddo & Cie and the issuer have agreed that Oddo & Cie will produce and disseminate investment recommendations on the said issuer as a service to the issuer

Yes

Liquidity provider agreement and market-making

At the date of the distribution of this report, does Oddo Group, or Oddo & Cie, or Oddo Seydler act as a market maker or has Oddo Group or Oddo & Cie, or Oddo Seydler signed a liquidity provider agreement with the subject company/ies?

Yes

Significant equity stake

Does Oddo Group, or Oddo & Cie, or Oddo Seydler own 5% or more of any class of common equity securities of the subject company/ies?

No

Does the subject company beneficially own 5% or more of any class of common equity of Oddo & Cie or its affiliates?

No

Disclosure to Company

Has a copy of this report ; with the target price and/or rating removed, been presented to the subject company/ies prior to its distribution, for the sole purpose of verifying the accuracy of factual statements ?

No

Have the conclusions of this report been amended following disclosure to the company/ies and prior its distribution?

No

Additional material conflicts

Is Oddo Group, or Oddo & Cie, or Oddo Seydler aware of any additional material conflict of interest?

No

Page 3/4

Statement of conflict of interests of all companies mentioned in this document may be consulted on Oddo & Cie's: www.oddosecurities.com

Disclaimer:

Disclaimer for Distribution by Oddo & Cie to Non-United States Investors:

This research publication is produced by Oddo Securities ("Oddo Securities"), a division of Oddo & Cie ("ODDO"), which is licensed by the Autorité de Contrôle Prudentiel et de Résolution (ACPR) and regulated by the Autorité des Marchés Financiers ("AMF"), and/or by ODDO SEYDLER BANK AG ("Oddo Seydler"), a German subsidiary of ODDO, regulated by Bundesanstalt für Finanzdienstleistungsaufsicht ("BaFin").

The research, when distributed outside of the U.S., is intended exclusively for non-U.S. customers of ODDO and cannot be divulged to a third-party without prior written consent of ODDO. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

This research has been prepared in accordance with regulatory provisions designed to promote the independence of investment research. "Chinese walls" (information barriers) have been implemented to avert the unauthorized dissemination of confidential information and to prevent and manage situations of conflict of interest. This research has been prepared in accordance with French and German regulatory provisions designed to promote the independence of investment research. The recommendation presented into this document is reviewed and updated at least following each Quarterly Report published by the issuer purpose of this Research Report.

At the time of publication of this document, ODDO and/or Oddo Seydler, and/or one of its subsidiaries may have a conflict of interest with the issuer(s) mentioned. While all reasonable effort has been made to ensure that the information contained is not untrue or misleading at the time of publication, no representation is made as to its accuracy or completeness and it should not be relied upon as such. Past performances offer no guarantee as to future performances. All opinions expressed in the present document reflect the current context and which is subject to change without notice. The views expressed in this research report accurately reflect the analyst's personal views about the subject securities and/or issuers and no part of his compensation was, is, or will be directly or indirectly related to the specific views contained in the research report.

This research report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice.

Disclaimer for Distribution by Oddo New York to United States Investors:

This research publication is produced by Oddo Securities, a division of ODDO and/or by Oddo Seydler.

This research is distributed to U.S. investors exclusively by Oddo New York Corporation ("ONY"), MEMBER: FINRA/SIPC, and is intended exclusively for U.S. customers of ONY and cannot be divulged to a third-party without prior written consent of ONY. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

This research has been prepared in accordance with regulatory provisions designed to promote the independence of investment research. "Chinese walls" (information barriers) have been implemented to avert the unauthorized dissemination of confidential information and to prevent and manage situations of conflict of interest. This research has been prepared in accordance with French and German regulatory provisions designed to promote the independence of investment research.

At the time of publication of this document, ODDO and/or Oddo Seydler, and/or one of its subsidiaries may have a conflict of interest with the issuer(s) mentioned. While all reasonable effort has been made to ensure that the information contained is not untrue or misleading at the time of publication, no representation is made as to its accuracy or completeness and it should not be relied upon as such. Past performances offer no guarantee as to future performances. All opinions expressed in the present document reflect the current context and which is subject to change without notice.

Rule 15a-6 Disclosure:

Under Rule 15a-6(a)(3), any transactions conducted by ODDO and/or Oddo Seydler, and/or one of its subsidiaries with U.S. persons in the securities described in this foreign research must be effected through ONY. As a member of FINRA, ONY has reviewed this material for distribution to U.S. persons as required by FINRA Rules 2241(h) applicable to dissemination of research produced by its affiliate ODDO.

FINRA Disclosures:

  • Neither ONY, ODDO, nor Oddo Securities, nor Oddo Seydler beneficially owns 1% or more of any class of common equity securities of the subject company.

  • The research analyst of Oddo Securities or Oddo Seydler, at the time of publication of this research report, is not aware, nor does he know or have reason to know of any actual, material conflict of interest of himself, ODDO, Oddo Securities, Oddo Seydler or ONY, except those mentioned in the paragraph entitled "Risk of Conflict of Interest."

  • Oddo Securities or ODDO or Oddo Seydler may receive or seek compensation for investment banking services in the next 3 months from the subject company of this research report, but ONY would not participate in those arrangements.

  • Neither ONY, ODDO, Oddo Securities, nor Oddo Seydler has received compensation from the subject company in the past 12 months for providing investment banking services except those mentioned in the paragraph of "Risk of Conflict of Interest".

  • Neither ONY., ODDO, Oddo Securities nor Oddo Seydler has managed or co-managed a public offering of securities for the subject company in the past 12 months except those mentioned in the paragraph of "Risk of Conflict of Interest" .

  • ONY does not make (and never has made) markets and, accordingly, was not making a market in the subject company's securities at the time that this research report was published.

Regulation AC:

ONY is exempt from the certification requirements of Regulation AC for its distribution to a U.S. person in the United States of this research report that is prepared by an Oddo Securities research analyst because ODDO has no officers or persons performing similar functions or employees in common with ONY and ONY maintains and enforces written policies and procedures reasonably designed to prevent it, any controlling persons, officers or persons performing similar functions, and employees of ONY from influencing the activities of the third party research analyst and the content of research reports prepared by the third party research analyst.

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Contact Information of firm distributing research to U.S. investors: Oddo New York Corporation, MEMBER: FINRA/SIPC, is a wholly owned subsidiary of Oddo & Cie; Philippe Bouclainville, President (pbouclainville@oddony.com) 150 East 52nd Street New York, NY 10022 212-481-4002.

splendid medien AG published this content on 12 December 2016 and is solely responsible for the information contained herein.
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