Original-Research: DEAG Deutsche Entertainment AG (von Montega AG)

Original-Research: DEAG Deutsche Entertainment AG - von Montega AG

Einstufung von Montega AG zu DEAG Deutsche Entertainment AG

Unternehmen: DEAG Deutsche Entertainment AG
ISIN: DE000A0Z23G6

Anlass der Studie: Update
Empfehlung: Buy
seit: 18.12.2019
Kursziel: 6.10
Kursziel auf Sicht von: 12 months
Letzte Ratingänderung: -
Analyst: Henrik Markmann

Acquisition in ticketing strengthens market position in the UK
DEAG announced the day before yesterday an acquisition in the area of
ticketing. The company took a stake of 75% in the British ticketing
provider Gigantic Holdings Limited, which was founded in 2007. The company
claims to be one of the largest independent providers in the UK with more
than 1.0m tickets sold per year.
Gigantic’s ticket platform exclusively offers third-party content such as
concerts, events and festivals of artists like Elton John, James Blunt or
Lana Del Rey. We believe the platform is a meaningful supplement to DEAG’s
ticketing business as it mainly offers own content. We understand that
Gigantic’s ticketing is handled by an in-house software, so the margin
should even be higher than that of MyTicket. As a reminder: MyTicket has
been collaborating with SecuTix since the beginning of Q3/19 and therefore
should have significantly reduced the platform’s cost base. We assume that
MyTicket has an EBITDA margin of between 30% and 35%, whereas we consider a
margin of 35% and 40% to be realistic for Gigantic.
Last but not least, DEAG’s acquisition underlines the high relevance of the
UK market, which is the center of business activities with 44% of group
sales, alongside Germany and Switzerland with 56%. The UK is the second
largest market in the media and entertainment industry after Germany.
According to PwC, this market is expected to grow even stronger at an
average rate of 2.8% p.a. to GBP 76.0bn by 2022 (CAGR 2018-2022 Germany:
1.8%). Based on the constantly increasing digitization also in Germany,
ticketing is likely to benefit to a disproportionate degree.
DEAG expects to have sold more than 1.1m tickets via MyTicket in 2019. This
corresponds to growth of c. 60% yoy driven amongst others by an exclusive
pre-sale of some 150k tickets for Böhse Onkelz concerts as well as over
500k tickets for the Christmas Garden events. Based on additional inorganic
growth after the acquisition of Gigantic, management expects to see at
least a doubling of the ticket volume to well in excess of 2.0m tickets
sales in 2020.
For 2020, we expect an additional sales contribution of EUR 1.7m and EBITDA
of EUR 0.7m thanks to the full consolidation of Gigantic. The companies
have agreed to keep the purchase price confidential. However, we consider
an EBITDA multiple of 7x to 9x to be realistic for an established and
high-margin company. Based on our estimates, the purchase price should have
been between EUR 5.0m and EUR 5.5m. This has been taken into account in our
valuation model. If DEAG succeeds in marketing all of its own events
through Gigantic on the UK market in the medium term, this would be a
powerful lever. Additional momentum in ticketing can be expected in the
subsequent years in our view, for instance if Ed Sheeran would tour with
DEAG again.
Conclusion: We regard the ticketing acquisition as meaningful both
strategically and in the short to medium term. After having slightly
increased our estimates from 2020 onwards, we therefore confirm our buy
rating. The new price target is EUR 6.10 (previously: EUR 6.00).
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About Montega
Montega AG is one of the leading independent German research institutions
with a strong focus on German SMEs. The Coverage Universe
includes stocks from the MDAX, TecDAX and SDAX as well as selected
second-line stocks and is constantly being expanded through successful
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oriented value investors, asset managers and Family offices primarily from
Germany, Switzerland and Luxembourg. The analysts of Montega are
characterized by excellent and frequent contacts to the top management,
in-depth market knowledge and many years of experience in the analysis of
German small and mid-cap companies.

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