Corus Entertainment Inc.

Corus Entertainment Inc. (TSX: CJR.B) is a media and content company which operates in the diversified media industry and has two business segments like television and radio.

Key Updates:

• Higher dividend yield: The group reported stable dividend payments over the years, strong cash flows, which is a key positive. In 9MFY21, the company paid a dividend of CAD 37.493 million, as compared to CAD 37.901 million in pcp. Moreover, the stock of CJR.B holds an attractive dividend yield of ~3.865% on an annualized basis, which is a key positive considering the persisting interest rate scenario.

Five-year dividend distribution

• Healthy balance sheet: The company successfully deleveraged its balance-sheet, which is a key positive. Net-debt to segment profit stood at 2.82x on Q3FY21, which declined from 3.22x on Q3FY20, which is encouraging. The company is targeting to lower its net debt to segment profit lower than 2.5x, which looks impressive.

Source: Company Report

• Future prospects looks lucrative: The company offers services which are related to next-generation video platforms for PayTV, X1 and MediaFirst, which works on the enhanced set-top box measurement and cross-platform video audiences. The above platform is gaining traction supported by the evolution of conventional television systems to automated buying platforms. Furthermore, the company is investing in Ad Tech plus Data Analytics, connect with audiences in innovate ways, and build a content powerhouse for the audience through the company’s Global TV Application. The above steps are impressive, and the company has an upper hand to grab the coming opportunities coming from the sector.
  

Q3FY21 Financials Highlights:

• B announced its third quarter results, wherein the group revenue of CAD 402.999 million, climbed from CAD 348.967 million in the previous corresponding period (pcp). The increase was supported by strong momentum from both segments.
• The quarter was marked by higher direct cost of sales, general and administrative expenses, while a partially supported by lower interest expense.
• Income before income taxes stood at CAD 65.533 million, as compared to a loss of CAD 757.227 million in pcp.
• Net income stood higher at CAD 48.275 million, as compared to a net loss of CAD 748.280 million in Q3FY20.

Q3FY21 Income Statement highlights (Source: Company Report)

Risks: The company witnessed a surge in input costs in the recent past, and the continuation of the above trend would dampen the group’s margin and cash flows.

Stock Recommendations:

In the recent past, the company recorded solid growth in its revenues from the rapidly growing streaming distribution platforms and digital advertising markets. Notably, growth from the new platform revenues grew by 8% on a CAGR basis since FY18 to Q3FY21, supported by an incremental subscriber base from new streaming initiatives coupled with growing advertising revenue from digital platforms.

The stock of CJR.B is available at a lower valuation of EV to EBITDA multiples of 4.6x on an NTM basis, as compared to the industry (Media & Publishing) median of 8.1x. Hence, considering the aforesaid facts, we give a ‘Hold’ rating on the stock of CJR.B at the last traded price of CAD 6.21 on August 30, 2021.

One-Year Technical Price Chart (as on August 30, 2021). Analysis by Kalkine Group

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

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