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 with a focus on kids & family entertainment, scripted comedy, drama & factual/non-scripted content.

Key highlights 

• 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 actively build its divisions and their separate brands. 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.

• Rapidly expanding Atomic Cartoons: The company's atomic platform has been steadily developing thanks to a rich slate of content. In 2017, it opened a Los Angeles office, followed by studio in 2020. With its growing presence in Los Angeles, Atomic has been able to develop more direct and accessible ties with several of its partners, including Netflix, Disney, and NBCUniversal.

• Following the global trend: In line with worldwide trends, an increasing portion of group’s growth and future business emphasis is with OTT platforms such as Netflix, Amazon and others. It plans to maintain its position as a preferred content provider for these big OTT platforms by focusing on developing iconic brands wherever feasible.

• Industry beating margins: The management’s solid determination helped the group in leaping the industry median margins on many fronts in Q3 2021, which exhibits the competitive advantage of the company within the industry. The chart below gives a glimpse of this. 

• Increase in free cash flows: Even in this challenging time, the Company managed to generate robust free cash flow of CAD 7.4 million for the nine months ended March 31, 2021, against CAD 4.7 million in pcp. The increase was primarily due to growth in production services attributed to the Kids and Family division as well as an increase in licensing and distribution revenues.
  

Financial overview of Q3 2021

Source: Company 

• In Q3 2021, the company reported higher revenue at CAD 37.6 million, against CAD 29.5 million in the previous corresponding period. The company clocked higher revenue due to healthy performance from Production services, Licensing and distribution.
• Income before other items in Q3 2021 stood at CAD 4.67 million compared to CAD 4.48 million in pcp. The increase was primarily due to higher revenue, partially offset by higher direct operating expenses which stood at CAD 26.7 million V/s 18.8 million in pcp.
• The company reported a net income of CAD 3.6 million in Q3 2021, against CAD 3.1 million in pcp.
• As at March 31, 2021, the Company had a cash balance of CAD 18.8 million, compared to CAD 12.8 million at June 30, 2020.
  

Risk associated with investment

Many restrictions played a direct role to drag down the company’s financial performance. Although the government has gradually announced the stages of its reopening plan, if the pandemic situation arises again, it may hinder the business of the company also. 

Valuation Methodology (Illustrative): EV to Sales 

Stock recommendation 

The company continues to grow rapidly across all its divisions, which is reflected in the strong Q3 2021 results. It is strengthening its strategic business relationships with key North American and international broadcasters, international distributors, and major global digital platforms in order to focus on higher-budget, higher-quality programs, believing that this would extend the life and thus increase the value of its library. It also boosted its production backlog, which was worth CAD 102.2 million as of March 31, 2021, compared to CAD 86.1 million in pcp. Furthermore, the company's free cash flows and industry-leading margins demonstrate its resiliency. Based on technical analysis, the group has a support at CAD 3.8 level. Therefore, based on the above rationale and valuation, we recommend a “Speculative buy” rating on the stock at the closing price of CAD 4.61 on June 4, 2021. We have considered Corus Entertainment Inc, Quebecor Inc etc. as the peer group for the comparison.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level. 

One-Year Technical Price Chart (as on June 04, 2021). Analysis by Kalkine Group 

Glacier Media Inc

Glacier Media Inc (TSX: GVC) is a Canada based company which offers information and marketing solutions. It operates in three segments Environmental, Property and Financial Information, Commodity Information and Community Media.

Key highlights

• Disposed JWN energy business: Recently, the company’s affiliate GVIC Communications Corp. sold its JWN Energy information business to geoLOGIC systems ltd for CAD 4.5 million in cash, plus a potential earn-out of up to CAD 3.5 million. The earn-out is revenue based and payable over three years. It recorded an estimated CAD 1.2 million as a receivable, within other assets, relating to the discounted deferred consideration.

• Reports higher cash flow from operations: The company reported higher consolidated cash flow from operations of CAD 5.9 million (before changes in non-cash operating accounts) for the three months ended March 31, 2021, as compared to CAD 0.5 million for the same period in the prior year.

• Ample liquidity position: The Company is now in a significantly stronger financial position with the Cash and cash equivalents balance at CAD 15.9 million, increased from CAD 14.2 million on December 31, 2020. Moreover, the Company had no senior debt, and current and long-term debt totaled at CAD 2.6 million.

Financial overview of Q1 2021 (In thousands of CAD)

Source: company

• In Q1 2021, the company reported CAD 39.4 million revenue, compared to 43.2 million in the previous corresponding period. The revenue fell primarily due to declining print advertising revenue and the cyclical nature of certain businesses of the group. This is partially being offset by the increase in community media digital revenue.
• The company's operating profit increased to CAD 4.4 million in the reported period, compared to CAD 1.9 million in pcp. The increase was mainly due to lower direct expenses, which stood at CAD 25.3 million V/s CAD 31.9 million in pcp.
• Net gain on sale of CAD 2.2 million along lower interest expense and lower depreciation helped the company to clock a net profit of CAD 3.3 million in Q1 2021, against a net loss of CAD 12.1 million in pcp.

Risks associated with investment

The company derives its revenues from selling advertising and subscriptions related to its publications; a drop in the subscription level can lead to adverse results. The other risk factors include foreign exchange rate fluctuations, the seasonal and cyclical nature of the agricultural and energy sectors, discontinuation of government programs, general market conditions in Canada and the United States, changes in the prices of purchased supplies including newsprint, and cybersecurity risk.

Stock recommendation

While the pandemic is still affecting the Company’s businesses to varying degrees, its digital media, data, and information businesses have held up relatively well. Revenues have begun to recover in several areas and are gradually improving. The Company also implemented some extensive measures to reduce operating expenses to ensure its businesses can operate profitably at the reduced revenue levels, which is a key positive. Moreover, the Company is working to maintain sufficient levels of operating income within these levels and making concerted efforts to bring revenues back further and increase profits and cash flow. Based on technical analysis, the stock has support at CAD 0.39 level. On the valuation front, the stock is available at TTM EV/EBITDA of 2.54x against the industry (Media & Publishing) median of 5.46x. Hence, considering the aforementioned facts, we recommend a “Speculative Buy” rating on the stock at the closing price of CAD 0.48 on June 04, 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock if the price closes below the support level.

One-Year Technical Price Chart (as on June 04, 2021). Analysis by Kalkine Group

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

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.