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CIDM: Buried in Cinedigm is a Content Distribution and OTT Business Worth Three Times the Total Company

By Lisa Thompson



‣ Cinedigm’s (NASDAQ:CIDM) prospects have been supercharged by a huge $40 million capital infusion from Chinese investor, Bison Capital, who now owns 56% of the company and has two board seats. This relationship has also enabled movie and TV distribution deals approved by the Chinese government through Starrise Media and others.

‣ This investment allowed Cinedigm to retire all its convertible notes and reduce future interest payments. It should also increase distribution revenues by allowing Cinedigm to release US movies to Chinese theatres as well as stream addition content to Chinese audiences. This could add millions of dollars to future revenues. The Chinese market is highly regulated and to date only major US studios have been allowed to release a limited number of movies there. Cinedigm is the first independent distributor to be given permission. Revenues from this new partnership should begin the December quarter.

‣ Total revenues for Cinedigm have been declining due to its legacy movie equipment business reaching its contracted ends and that trend is not expected to turn around until FY 2022. If the company manages to spin off or somehow classify its legacy business as a discontinued operation, it would immediately show significant total revenue growth. In the interim, the declining business unit will be treated as a cash cow to pay off its debt.

‣ Cinedigm is can be valued looking at it two main businesses and valuing them separately. If we assume the projector business has no value at all, the company’s worth is entirely based on its distribution and content business. Using a metric of enterprise value to sales and its industry averages and Cinedigm’s calendar year sales, we believe that business is worth $170 million or $4.50 per share. We are basing this on an estimate of $34.4 million in sales in calendar year 2018 and a peer average of 5.3 times EV to sales.

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