Post by
SunsetGrill on Dec 21, 2022 2:03pm
TD and YasmiNutinButBS - Forever the Optimists
TD Analysis below - Yasim you moron - Gee they didnt buy back any shares? You needed confirmation of that.Anyone with a brain new they couldnt.
Recommendation: BUY Risk:
HIGH 12-Month Target Price: C$4.5
Prior: C$5.00
12-Month Dividend (Est.): C$0.24
12-Month Total Return: 145.6%
Market Data (C$) Current Price C$1.93
52-Week Range $1.92 - $5.44
Mkt Cap (f.d.) ($mm) $385.0 Float Cap ($mm) $363.6
Current Dividend $0.24 Dividend Yield 12.4% Avg. Daily Trading Vol. 2,355,449
Event Q1/23 results expected on January 13. Impact: NEGATIVE We fear that the recession in advertising spending remains in full force; so we have lowered our TV advertising revenue forecasts throughout F2023 (our new estimates are shown in Exhibit 1). More details on our estimate changes are presented in page two. We continue to expect a partial cyclical bounce in revenue in 2024, plus there should be some opex relief from CPE (Canadian programming expenditure) costs. The catch-up payments (related to production delays during the pandemic) should drop to ~$10 million from ~$20 million, and the 30% of trailing revenue formula should allow for lower CPE costs on a lag to weak revenue in 2023. TD Investment Conclusion Regulatory change remains on the horizon, and we hope to see M&A catalysts at some point (radio rules have already changed; so this could happen in the next year, while TV consolidation could take 2-3 years to play out). FCF easily covers the dividend (30% payout ratio) and allows for debt repayment even in an arguably trough year like 2023 (albeit debt/EBITDA increases owing to the depressed EBITDA figure). We believe it is unreasonable to value the name on trough results in 2023; so we are looking out to 2024E and using a 20% FCF yield (equates to 5x EBITDA). Then we apply a 10% time-value discount to get a target price of $4.50. This is down from our previous target price of $5.00, but it is still dramatically higher than the current price. Recent index selling has pushed this stock too low, in our view (52% FCF yield, using our new 2024 estimates); so we reiterate our BUY rating. Investors will likely require patience, but the 12% dividend yield provides ample reward while one waits.
Details We have lowered our TV advertising revenue growth forecast for Q1/23 to -13% (from - 9% previously). We have also factored in an approximately $2 million non-regularly recurring benefit to subscription revenue in Q1/22 (normal course on contract renewals, but lumpy), and we have assumed that some content deliveries will get delayed from Q1/23 into later quarters (owing to what we are seeing from other production names under coverage). We do not believe that programming costs have declined in tandem with the lower advertising revenue (key U.S. shows are still getting delivered and Corus is still incurring CRTC-mandated CPE catch-up costs); so the lower revenue estimates have fully affected our EBITDA and FCF estimates (our revised Q1/23 estimates are shown in Exhibit 2, while our revised annual estimates are presented in Exhibit 3).
Valuation CJR.B’s shares are trading at 4.8x 2023E EBITDA vs. its normalized long-term historical average of 5x8x and the key comps shown in Exhibit 5.
Justification of Target Price Our target price is based on a 20% yield on 2024E FCF, which equates to 5x EBITDA. We then apply a 10% time-value discount.
Comment by
Puma1back on Dec 22, 2022 4:21pm
That's an interesting summary byTD: makes sense that as we are rolling into later H1 that you woukd look forward through the trough that was getting priced into the stock back in later fall. debt to ebitda looks like it may peak around 3.8 times at the spot multiple , though the metric they use is a rolling forward average.