RE:RE:RE:Intensely undervalued...too risky a stock?From Cannacord and reported in the Globe: wait is going to be longer -------- they also should be pushing an adjusted leverage calculation that removes those idiotic signed occupancy rental leases from the liability side balance sheet. ( afterall, the debit side of that IAS entry is just plain stupid).
Canaccord Genuity analyst Aravinda Galappatthige expects Corus Entertainment Inc.(CJR.B-T) to continue to be hurt by “soft” television advertising trends through the first quarter of its 2023 fiscal year, warning of “near-term pain despite underlying value.”
“While we continue to believe that Corus’ FCF generative potential offers greater intrinsic value than the market affords it currently, there is an increasing likelihood that conditions could weaken before they get better,” he said. “Results through H1/23 are likely to look optically troubling with EBITDA declines in the 25-per-cent vicinity, and we cannot dismiss the prospect of double-digit ad declines through the middle of the year (particularly the seasonally significant Q3). As EBITDA estimates are lowered, the leverage ratio keeps rising. In fact, on our revised estimates, the leverage ratio (net debt/LTM EBITDA) touches 3.5 times again by Q3/23, which is likely to further impact the risk profile of the stock.”
Pointing to recent quarterly results of other linear and digital platforms, “as well as intra-quarter comments from public companies,” Mr. Galappatthige lowered his TV ad revenue expectation for the quarter to a decline of 12 per cent from 9 per cent previously. That’s narrowly better than the 14-per-cent drop seen in the fourth quarter of 2022.
He also expects profitability to be hurt by “elevated” programming costs, warning a “weakening EBITDA picture remains a concern.”
“While the ad weakness is understandable given the present macro picture and advertiser tendencies to pull back sharply during the initial phase of a slowdown, lack of flexibility on the cost side remains a major challenge for Corus’ financial outlook,” he said. “Programming costs, which make up nearly 60 per cent of TV opex, is expected to grow mid-single digits in F2023 regardless of ad market conditions due to programming commitments to U.S. studios as Corus attempts to secure key content in a competitive market, maintain ratings at its linear channels, and also drive growth in digital. This leaves a lot of cost rationalization to be done on the SG&A side, which frankly we have seen very little of at this point. Hence, another step down in terms of advertising expectations would likely have a disproportionate impact on EBITDA, if we are forced to revise down again.”
Maintaining a “speculative buy” rating for Corus shares, Mr. Galappatthige trimmed his target to $2.60 from $2.75. The average is $3.18.