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  • Writer's pictureMark Watson-Mitchell

TV programmes, cinemas, rare books and compliance


STV Group (LON:STVG) – setting a new Target Price ahead of results


In just one month’s time we will be seeing the 2023 final results being announced by this Glasgow-based producer and broadcaster of television programmes.


We already have guidance that, despite 20% better revenues, its actual profits will be some 26% lower on the year.


In the last year or so the £89m capitalised group has been spreading its wings through a programme of strategic acquisitions.


The latest deal was just days ago when it stepped up its stake in Two Cities Television from 25% to a controlling position of 51% of the equity.


I have previously commented upon this group and the content it produces and broadcasts across the country, whilst my original Target Price went close, but never close enough to score a hit.


Now, ahead of the disappointing results, I am setting a new Target Price for the group’s shares.


In last November’s Trading Update, CEO Simon Pitts stated that:


"STV continues to make strong strategic progress despite a challenging linear advertising and commissioning market impacted by ongoing economic uncertainty in the UK.


Our diversification strategy delivered total revenue growth of more than 30% for the first 9 months of the year as well as material profit growth in our Digital and Studios businesses.


While the linear advertising picture is weaker than expected in Q4, VOD advertising on STV Player continues to show good growth in 2023 and STV regional advertising is once again outperforming national thanks to the ongoing effectiveness of the STV Growth Fund.


We remain confident in our future growth prospects, with a strong content line-up on STV and STV Player, a compelling pipeline of new programme ideas across the expanded STV Studios, and a clear growth strategy, ensuring that we are well placed for the economic recovery when it comes."


Following the latest deal with Two Cities, analyst Roddy Davidson at Shore Capital Markets considers that the current stock valuation is extremely modest, given its underlying strengths, strategic momentum, robust financial position and medium-term financial outlook.


His estimates for 2023 are for revenues of £165.5m (£137.8m) with adjusted pre-tax profits of £17.8m (£24.1m), collapsing its earnings to 26.4p (40.0p) but maintaining its 11.3p per share dividend.


However, for the year now underway he now goes for £173.7m revenues, £19.0m profits, 27.8p earnings and a 12.0p per share dividend.


Jumping forward his estimates for 2025 suggest £188.5m sales, £22.4m profits, 32.0p earnings and 12.4p per share in dividend.


Over at Progressive Research, their analyst Jonathan Helliwell has similar projections for the three years, rating the relatively low risk investments that have been made in a number of areas, while the follow-on deal suggests that the strategy is delivering well.


While rating the Two Cities step-up suggesting it as a strong performance for the business, and with scope for material return on capital and value creation for the group.  

In my view, the group’s shares, which closed on Friday night at just 188.50p, look far too modestly valued.


I now set a new Target Price for the shares at 235p.


(Profile 10.12.21 @ 345p set a Target Price of 425p)

(Profile 05.02.24 @ 188.50p set a new Target Price of 235p)


Everyman Media Group (LON:EMAN) – very pleasing price performance


I am really quite pleased with the way the shares of another company within the entertainment sector are performing of late.


Everyman Media focuses on the premium end of the UK leisure/Cinema market, delivering unique, high quality, intimate venues in central high street locations.


The company is a leading independent cinema group in the UK and now operates across 44 venues, with a total of 152 screens.


The business aims to build its portfolio of venues, whilst successfully growing its existing estate by bringing together great food, drink, atmosphere, service and of course film, to create exceptional experiences for its customers.


The Everyman brand is positioned at the premium end of the UK leisure/cinema market, with its proposition based on high quality and unique venues in central high street locations, as well as differentiating itself by focusing on delivering a high-quality offering through its venues, content, staff and food and beverage.


Just two weeks ago the group issued a Trading Update for the 52-week period ended 28th December last year.


It guided that revenues were up 16.7% to £90.9m, while the £61.5m capitalised group’s EBITDA was 19.1% better at £16.2m.


I am sure that those figures would have been a great deal better, if not for the cinema-industry strikes late last Summer/Autumn – which meant that a number of key films were delayed for release early this year.


The film slate for 2024 includes titles such as Wicked, Despicable Me 4, Paddington in Peru, Joker: Folie à Deux, Inside Out 2, Mufasa: The Lion King, Dune: Part II and an untitled Gladiator sequel.


CEO Alex Scrimgeour stated that:


"We have delivered robust, double-digit growth in both revenue and EBITDA against a challenging economic backdrop, delays to new openings and both writers' and actors' strikes.


Further operational progress has been made with improvements in all key metrics, illustrating that our proposition remains as relevant as ever.”


The opportunities to develop new Everyman venues both across the UK and more widely are significant.


The group states that new venues can be part of a large new developer-led complex, the refurbishment of an old existing traditional cinema or conversion of small existing spaces.


The company states that its market share increased last year from 4.5% to 4.8%.


I feel that figure will grow and grow in due course, but without the corporate standards being lowered.


My comments and broker’s estimates were clear in my mention on 24th January, when they were just 62p.


On Friday night they closed at 67.5p, in reaction to news that Non-Executive Director Michael Rosehill’s Blue Coast Private Equity outfit had increased its stake to 25.08m shares, some 28.3% of the Everyman equity.


It looks as though Blue Coast took out a big chunk of the 6.7m shares sold off by 9.99% holder Canaccord Genuity, on behalf of its discretionary clients – taking their holding down to 2.68% of the EMAN equity.


I feel that these shares are going higher, so Hold very tightly.


(Profile 21.08.23 @ 59p set a Target Price of 73.5p)


Some Quick Notes……. A good read and interesting studies


I noticed that Peter Gyllenhammar, the Swedish small company specialist, has increased his company’s holding in the Scholium Group (LON:SCHO) which is engaged in the business of rare books, modern prints, art and collectibles. 


With its shares trading at just 39p the New Bond Street-based company is capitalised at only £5.30m, yet it has net assets of £9.67m, worth 71.1p per share.


Gyllenhammar is pursuing this totally undervalued business.

 

(Profile 29.11.21 @ 36p set a Target Price of 45p*)


I liked the look of the recent disposal of its mortality data business by Wilmington (LON:WIL). 


Employing 1,000 people and selling to over 120 countries globally, the provider of data, information, education and training in the global Governance, Risk and Compliance markets, sold off that enterprise for £9.6m.


The proceeds from which, will be used for ‘general corporate purposes’ stated the company.


CEO Mark Milner stated that:


"This sale reflects our continued and active management of our portfolio as we assess the potential of each business to exhibit the six common Wilmington characteristics that we recognise as key drivers of organic revenue growth and profitability improvement."


The group’s shares have responded well to the disposal and at 335p are holding on to their steady rise since 2020.


No rush to sell yet – the consensus of analyst’s average Price Objective is 434p.



(Profile 22.06.20 @ 143p set a Target Price of 175p*)

 

(Asterisks * denote that Target Prices have been achieved since Profile publication)

 

 

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