Euro Pacific 19.01.2016 report excerpt $0.65PT“We derive our baseline $0.65 PT using a DCF valuation with a relatively conservative 17% discount rate and a terminal value of 9x F2022 EV/EBITDA (10.7x FCF). Our forecasts reflect revenue and EBITDA CAGRs at 14.2%/42.4% across the F2016-22 period. We have D-BOX crossing the $50M revenue threshold in F2022 with EBITDA and FCF at $20.5M and $16.8M respectively, or $0.10 per share for the period. Our PT reflects our base case scenario. We believe investors should give full attention to more aggressive scenarios where theatre adoption exceeds our forecasts (solid odds given the successful penetration of new markets such as Asia or within existing regions), where the home theatre market takes on greater traction spurred on by VR, OTTP, and next generation seating. We believe VR has the potential to spur simulation adoption well beyond our forecasts. For prudence we present a downside scenario supporting a DCF valuation more in line with the current capitalization. Our downside, base and upside scenarios range from $0.37 to $0.66 and on to $0.94. We recognize the potential for large client wins to support PTs well beyond our upside scenario. We see D-BOX as an attractive takeout target. With 2.8% of the shares in management and the Board’s control and 11.7% with the Caisse, control is in the market. We believe the Board and management are focused on building greater shareholder value with potentially aggressive gains within their reach in commercial/home theatre and gaming markets and in simulation markets. VR adoption is seen as a potentially strong catalyst to already aggressive growth expectations. We believe management is driven towards results more in line with and most likely well above our upside scenarios. We see the next three years as critical to defining longer-term growth expectations. Eventually, D-BOX could be attractive to varied suitors ranging from the studio aligned distributors or technologies such as Dolby, to technology or OTTP providers looking to add functionality. D-BOX’s ultimate value will be framed by its technology, library, contract partners, and key studio relationships.”