18.12.2019 DEAG Deutsche Entertainment AG DE000A0Z23G6
Original-Research: DEAG Deutsche Entertainment AG (von Montega AG): Buy
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
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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Medien (Film, Musik) , A0Z23G , LOUD , XETR:ERMK