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CIDM: Raising Estimates Due to the Sale of Projectors in FYQ4

12/19/2018
By Lisa Thompson

NASDAQ:CIDM

READ THE FULL CIDM RESEARCH REPORT

Cinedigm (NASDAQ:CIDM) announced plans to sell 125 digital cinema projection systems from the company’s Phase 1 purchases on or about January 15, 2019 and is currently in the process of selecting an advisory firm with expertise in this area to monetize the remaining 3,582 equipment systems. 142 of such systems have already been sold or are contracted for sale to date. The company will be accounting for these sales as other income on its income statement and we are adding this number to FY 2019 Q4 and FY 2019 revenues. We estimate that these systems can be sold for approximately $10,000 per machine and this could add $1.25 million in other income to the quarter and the year. As a result we are raising FYQ4 to a loss of $0.14 from a loss of $0.18 and the full year estimate to a loss of $0.49. Since selling the owned equipment is part of the business plan of the company, we expect that these sales may also be added to EBITDA calculations.

Other News

Since reporting its September quarter Cinedigm has been expanding OTT distribution and content at a rapid pace. Since its FYQ2 conference call it has announced a number of actions that should accelerate the growth of its streaming revenues.

• On Nov. 26, 2018 Cinedigm announced that the DOVE CHANNEL, was now available over the Internet on Comcast’s Xfinity X1. DOVE CHANNEL can be added to X1 customers’ service for $4.99 per month.

• On Nov. 28, 2018 Cinedigm announced an agreement to acquire the digital comic book service ComicBlitz. The deal is expected to close by year-end and be accretive within the first quarter following closing, pending certain license deals currently in negotiation. The deal could generate more than $5 million in incremental annual digital revenues within 18-24 months after closing, if all goes according to plan.


View Exhibit I

• On Dec. 04, 2018 the company announced a partnership with China International TV Corporation to bring over 500 hours of popular Chinese content to the US via its Bambu channel that will launch in early 2019.

• On Dec. 06, 2018 announced plans to launch matchpoint™, an innovative managed-service technology platform that enables content distributors, OTT service operators, web publishers, and OEMs to efficiently and cost-effectively create compelling OTT and media subscription services. matchpoint will be offered at a competitive price and will available beginning in fiscal calendar Q1, 2019.

• On Dec. 10, 2018 Cinedigm agreed to acquire free Zurich-based OTT VOD service Viewster and its subsidiary platform Viewster Anime. Their offerings will be immediately combined with Cinedigm’s and the service will be ported to Cinedigm’s platform. The acquisition is expected to close in January 2019. Viewster contributes over 5,000 films and TV series across a wide array of genres.


View Exhibit II

• On Dec. 18, announced that CONtv and the DOVE CHANNEL are now available now on Samsung’s TV Plus video service. CONtv and the DOVE CHANNEL are currently available on 2017 and 2018 Samsung Smart TV models, and will be rolling out to more models in the future.

Cinedigm is can be valued looking at it two main businesses and valuing them separately. If we simplistically 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 $121 million or $2.78 per share. We are basing this on an estimate of $30 million in sales in calendar year 2018 and peer averages of 3.9 to 4.1 times EV to sales.

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