TD's Take Results Continue to Recover; Share Price Should Follow
Event
Q4/21 results (8:00 am call at 1-888-437-2398).
Impact: SLIGHTLY POSITIVE
Revenue once again exceeded TD and consensus expectations, with TV advertising
revenue up 21% (we had expected +20%) and subscriber revenue up 3% (in
line with our estimate, but the best quarterly growth in over three years). EBITDA
exceeded consensus but it slightly missed our estimate (see figures below) only
because corporate costs more than doubled Y/Y (partially driven by a bounce back
in compensation accruals and share-based comp). It should be noted that 9% Y/Y
EBITDA growth was achieved despite CEWS benefits being only $1 million in Q4/21
versus $17.5mm in Q4/20.
The portion of TV advertising revenue from targeted audience solutions increased
to 34% from 21% Y/Y, while new digital platform revenue (streaming plus digital ad
sales) increased to 10% versus 8% of combined advertising and subscriber revenue.
Corus also announced new content sales to Disney+ and Hulu, and the release cites
US$34.5mm being received from the sale of a venture investment in early Q1/22
(that alone is worth ~$0.20 per CJR.B share as we had not included hidden assets
previously).
Strong FCF continues to be generated, with debt/EBITDA during fiscal 2021 being
reduced to 2.76x from 3.18x (almost into the target range of 2.0x-2.5x).
We believe the company is proving consistently that it is not only a good short-term
re-opening play, but that it is evolving its business mix to sustain positive revenue
growth for the long-term. However, CJR.B shares are still trading at basically the
same level they were at in early January, 2020 (aka pre-pandemic), and the FCF yield
remains excessive in our view at ~24%. If strong growth in Q1/22 (busiest seasonal
period of the year) is signaled on the call, we believe this stock should be well over
$6 today.
Total revenue of $361mm (13% y/y) versus TD/consensus of $357mm/$357mm.
Total EBITDA of $103mm (9% y/y) versus TD/consensus of $104mm/$98mm.
Television EBITDA of $110mm versus TD/consensus of $107mm (consensus
$105mm).
Radio EBITDA of $4mm versus TD/consensus of $5mm (consensus $3mm).
Adjusted EPS of $0.10 versus TD/consensus of $0.09/$0.09.
Recommendation: ACTION LIST BUY
Risk: HIGH
12-Month Target Price: C$9.50
12-Month Dividend (Est.): C$0.24
12-Month Total Return: 67.4%