Constantin Medien — A sporting chance

Constantin Medien — A sporting chance

After a complex series of disputes, now effectively resolved, Constantin is a focused sports media business, with a new management team, delivering sports content over a variety of owned free- and pay-TV channels, digital and mobile platforms. Its main revenue streams are advertising and sponsorship, with strengthening commercial relationships with gambling operators. Over half of its market valuation reflects its remaining stake in Highlight Communications, itself now considering a bid for Constantin.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

Constantin Medien

A sporting chance

Media

QuickView

14 November 2017

Price

€2.06

Market cap

€193m

Share price graph

Share details

Code

EV4

Listing

Xetra

Shares in issue

93.6m

Net debt (€m) as at 30 Jun 2017

46.8

Business description

The deconsolidation of Highlight Communications leaves Constantin as a pure play sports media company. The group’s key brand is Sport1, accessible on TV, online, mobile and on video platforms. PLAZAMEDIA supplies technical services for sports content providers.

Bull

Clear focus on sports.

End of major litigation.

Improved margin on remaining business.

Bear

Need to refinance bond ahead of April 2018.

Costs of deconsolidation, severance etc.

Below expected performance from Sport.

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Bridie Barrett

+44 (0)20 3077 5757

After a complex series of disputes, now effectively resolved, Constantin is a focused sports media business, with a new management team, delivering sports content over a variety of owned free- and pay-TV channels, digital and mobile platforms. Its main revenue streams are advertising and sponsorship, with strengthening commercial relationships with gambling operators. Over half of its market valuation reflects its remaining stake in Highlight Communications, itself now considering a bid for Constantin.

Legal disputes closed

There has been considerable upheaval over FY17 to date, principally relating to the relationship with Highlight Communications. Since August’s AGM, there has been a complete refresh of Constantin’s supervisory board. The management board now consists of CEO Olaf Schröder (previously running the Sports segment) and Dr Matthias Kirschenhofer as Chief Officer Legal & Finance (and MD Sport1 Media). Previous management board members have left the group. The legal case with Highlight (post the latter’s capital increase diluting Constantin’s holding below 50%) has been halted. A resolution has also been reached with Stella Finanz, with the group settling its loan with 8m Highlight shares. Constantin now holds 32.7% of Highlight’s equity. Constantin is currently renegotiating its €65m bond, expiring in April 2018 and carrying a 7.0% coupon.

Focus on broad spectrum of sports

Constantin is not in a position to enter into bidding wars over high-profile broadcast rights (nor would it wish to, given the available margins). Rather, it has widened its content in traditional sports, eg soccer, motorsports, ice hockey, basketball, darts, volleyball, US sports and boxing and expanding into new areas like eSports and drone racing. In doing so, it is strengthening commercial relationships, particularly with the gambling sector. Management attention was understandably diverted in H117, which will have had a financial impact that should start to correct in FY18.

Valuation: Operating business lowly valued

Post the deconsolidation of Highlight Communications, revised guidance is for lower FY17 revenues of €250-280m. The guided increased net income figure (€7-10m) is post the non-recurring, non-cash benefit less the costs of settling the various disputes. Any Highlight dividend would be incremental. At the current Highlight share price, the value of Constantin’s holding is €107m. The implied market valuation of the remaining operating business is €86m, or €0.92/share.

Consensus estimates

Year
end

Revenue
(€m)

PBT
(€m)

EPS
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/15

481

28.4

9.0

0.0

22.9

N/A

12/16

566

20.6

15.0

0.0

13.7

N/A

12/17e

275

20.3

9.0

0.0

22.9

N/A

12/18e

155

9.9

15.0

5.0

13.7

2.4

Source: Company accounts, DZ Bank

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US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Disclaimer

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison's solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are "wholesale clients" for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document.
A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a "personalised service" and, to the extent that it contains any financial advice, is intended only as a "class service" provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited ("FTSE") (c) FTSE [2014]. "FTSE(r)" is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE's express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Research: Healthcare

ROVI Laboratorios Farmaceuticos — Biosimilar enoxaparin launches

ROVI reported operating revenue of €203m for 9M17 (+ 6%), driven by exceptionally strong growth in the toll manufacturing business (+20%). The speciality pharmaceutical business grew 3%, aided by sales growth in newer product launches offsetting declines in the mature portfolio. ROVI has launched its internally developed biosimilar enoxaparin into the first European market (Germany) ahead of any competition; this is a key driver of sales and operating growth in the medium term. R&D progress continues with the long-acting DORIA (schizophrenia) and letrozole (breast cancer) having entered Phase III and Phase I of clinical-stage development respectively. Our revised valuation is €0.98bn.

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