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Peter Hodson Stingray Digital Group Inc. RAY.A-T TOP PICK Aug 03, 2018

This music media company produces music for cable companies. It trades at only 13 times earnings and could easily trade at higher multiples. They just bought a radio company that will be very accretive to earnings. The dividend has been increasing steadily. They have over 400 million users in over 156 different countries. Yield 2.6%. (Analysts’ price target is $11.64)

Peter Hodson

Owned

Unlock Rating

$9.030

Stock price when the opinion was issued

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PAST TOP PICK

A Top Pick August 21/2017, Up 9%) Pays a small dividend. Make a radio station acquisition he didn’t like, so he exited. Could be interesting for dividend growth.

DON'T BUY

He used own this music streaming business. After the raise in cash flow was directed to buying radio stations he got out. It is no longer of interest to him as these businesses do not make money.

DON'T BUY

He used to like it. It is a music service company. They were going to use their cash to purchase radio stations. He thinks radio will go the way of newspapers. It does not interest him. It was a nice stable cash cow and they should have built a growth business.

HOLD

They make digital music playlists. Earnings are expected to grow by 44% and a PE of 8 times. The ROE is 23%. Payout 40%, so the dividend looks sustainable. Yield 4%

DON'T BUY

It is a very cheap company. They are in the passive music business like a radio station. They are very different to Spotify. They are in a slower growth industry. They are buying up radio-station-like businesses. The big growth recently was buying a radio station out east. Don't expect it to expand to a ten times multiple. He would want momentum to come back to the name.

PAST TOP PICK

(A Top Pick Aug 08/18, Down 17%) They just increased their dividend and will keep raising it, but they get no investor love. They carry a lot of debt, but it should decline as they generate cash flow.

COMMENT

They bought Newfoundland Capital. It is a radio operator now. Debt is high but they keep increasing their dividend. People see them as background music in a retail environment. It is an okay stock and he would like it a lot better with a lot less debt.

HOLD

Pleasantly surprised with the business fundamentals. Aspects of their business are growing. Very undemanding valuation. Continue to hold. It's on his watch list.

WATCH

Is fairly illiquid, but profitable and pays a 6.6% dividend. Price targets are high, so there's a runway ahead. But two-thirds of the business is concentrated in Canada, and a big risk is if song royalties rise. It's profitable though. He's watching it.

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Peter Hodson Stingray Digital Group Inc. RAY.A-T TOP PICK Aug 03, 2018

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