Opinions
John Zechner
DHX Media
DHX.B-T
COMMENT
Dec 23, 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.
He likes this. To him it is almost a mini Disney. Content is king, and they own children’s content, which has a longer life than a lot of others out there. They are doing a better job distributing into other media as well. He likes the assets they have. The balance sheet is in better shape. They are starting to generate free cash flow again, and the operating cash flow looks good.