BULL POINTS:
■ Popularity of film entertainment in downturn
■ Strong release schedule
■ Growing content library
■ Strong earnings growth expected
BEAR POINTS:
■ Music business under pressure
■ High debt levels
Independent film distribution company Entertainment One is preparing for a blockbuster year after the runaway success of teenage vampire movie Twilight - one of last year's biggest grossing movies worldwide. The company is now looking forward to the launch of the sequel, Twilight: New Moon, due out this month, with the third instalment set for release in June 2010.
Entertainment One boasts an impressive pipeline of other films through to mid-2010, including highly anticipated movies such as Paranormal Activity and Men Who Stare at Goats. It is also benefiting from the tough economic conditions, as in times of tightened purse strings cinema admission tends to rise. According to the Cinema Advertising Association, UK cinema admissions surged 14.5 per cent in the first half of the year, compared with the same period in 2008. These trends were reflected in half-year results from the company this week, with revenues up by 25 per cent on the back of strong trading in the film division which increased sales by 73 per cent in the six-month period.
| ORD PRICE: | 39p | MARKET VALUE: | £50.7m | |
| TOUCH: | 37-41p | 12-MONTH HIGH: | 60p | LOW: 13.5p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 99p* | NET DEBT: | 86% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 264 | -7.7 | -9.5 | nil |
| 2009 | 343 | -31.0 | -23.2 | nil |
| 2010** | 411 | 3.4 | 1.6 | nil |
| 2011** | 458 | 12.0 | 5.9 | nil |
| % change | +12 | +253 | +269 | - |
Normal market size:3,000 Market makers:5 Beta:0.61 *Includes intangible assets of £100m, or 77p a share **Forecasts provided by Singer Capital Markets Research | ||||
More share tips and updates...
The remainder of the business consists of TV programming and a music distribution business, although this has been under pressure as CD sales continue to face pressures from online music. But continued growth in the films business should more than offset this and supports Singer Capital Markets' pre-tax profit forecast of £12m and reported EPS estimate of 5.9p for the year to end-March 2011.
In addition, the company has a content library of more than 4,000 film titles, 2,800 hours of TV programming and 15,000 music tracks that has recently been revalued at over $220m (£132m). That's not only 25 per cent higher than last year's valuation, but it also means the company's borrowings of £111m are well underpinned by the value of the library alone.
