Thunderbird Entertainment Group Inc

Thunderbird Entertainment Group Inc (TSXV: TBRD) is a multi-platform media production, distribution & rights management company. Its award-winning programs cover multiple genres focusing on kids & family entertainment, scripted comedy, drama & factual/non-scripted content.

Key HighlightsRobust Financial and Operational Performance: The company is setting the groundwork for long-term growth in response to rising demand, as evidenced by its strong financial performance in Q1FY22 (ended September 30, 2021), when revenue climbed by 77% to CAD 35.1 million. Its adjusted EBITDA was CAD 6.3 million, up from CAD 4.8 million in the previous comparable period, while free cash flow climbed by CAD 2.2 million to CAD 3.4 million for the three months ending September 30, 2021. 

• Strategizing to Grow Internationally: The company's objective is to build long-term value by expanding its programming library and utilizing its owned or managed IP to build its divisions and their separate brands actively. While the firm earns money through fees during the development and first distribution of its programs, one of its key goals is to develop programming that may produce various revenue streams in the long run.

• Following the Global Trend: In keeping with global trends, an increasing portion of TBRD's growth and future business focus is with OTT platforms like Netflix, Amazon, and others. It intends to continue to be known as the preferred supplier of programming for these leading OTT platforms to build iconic brands. By creating the company's consumer products and distribution division, the group also intends to develop and expand on its IP, which is a significant plus.
  

Financial Overview of Q1FY22

Source: Company 

• In Q1FY22, the company reported higher revenue at CAD 35.1 million, against CAD 19.8 million in the previous corresponding period. It clocked higher revenue due to growth in production service projects and the delivery of the live-action series Strays for CBC.
• In the reported period, income before income tax stood at CAD 2.8 million compared to CAD 1.8 million in pcp. This increase was primarily due to higher revenue, partially offset by higher direct operating expenses, which stood at CAD 24.8 million vs 11.7 million in pcp.
• TBRD reported a net income of CAD 1.9 million in Q1FY22, against CAD 1.4 million in pcp.

Risks Associated with Investment

The company is exposed to various risks ranging from intense competition and product acceptability among the large community. In addition, it is exposed to changes in technology, currency exchange risk and interest rate risks. Moreover, if the pandemic situation arises again, it may hinder the business of the company also. 

Valuation Methodology (Illustrative): EV to Sales Based

Stock Recommendation

The company continues to grow rapidly across all its divisions, reflected in the solid Q1FY22 results. It is strengthening its strategic business relationships with key North American and international broadcasters, international distributors, and significant global digital platforms to focus on higher-budget, higher-quality programs, believing that this will extend the life and thus increase the value of its library. Additionally, the content remains vital, and the company is laying the foundation to sustainably grow with the ever-increasing demand, which is a key positive. Therefore, based on the above rationale and valuation, we recommend a "Hold" rating at the closing price of CAD 4.83. We have considered LiveOne Inc, Gaia Inc, Cinedigm Corp etc., as its peer group for comparison.

One-Year Technical Price Chart (as on November 25, 2021). Source: Kalkine, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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