Opinions
Eric Nuttall
DHX Media
DHX.B-T
COMMENT
Oct 07, 2016
Stock price when the opinion was issued
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Produces and licenses children's content such as TV shows. Also licenses the properties to toymakers on different types of products. Got into a bit of a quandary where they were ramping up debt load and the earnings growth slowed down. The market punished the stock. Valuation is now getting to a level where it is a bit easier to digest. There are also activists entering the stock. The recent move by Disney, where they purchased some assets from Fox and were making a big statemen of the importance of owning content, is important. There may be potential buyers sniffing around a company like this, for the content. Still a higher risk, but he would be okay with a half position.
The CEO just stepped down. They were growing fast and adding debt to find it but then the growth fell off and they were left with the debt, so they started a strategic review and the CEO stepped down. This is not a great development. You should look elsewhere. He thinks they will have to sell the company now.
Put out a somewhat disappointing quarter in that they paid on top line. The EBITDA margin wasn’t as strong as the street consensus was, because they were spending more on Teletubbies as well as buying more content for DHX Television. He is hoping he can get this on a little bit more of a pullback. Looking out to 2017, the challenge in Canadian small cap is that there are very few companies that are able to put up positive 10%-15% organic EBITDA growth.