02.12.2020 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
DEAG closed Q3/20 with positive EBITDA despite significant negative effects due to corona crisis
Last Friday, DEAG published its Q3 report. As expected, the financial ratios were strongly impacted by the COVID-19 pandemic and therefore well below the prior-year figures. DEAG has confirmed its annual targets until the end of December despite the extension of the “lockdown light” in Germany.
Q3/20 sales fell strongly by -87.4% yoy to a mere EUR 7.4m. Given that DEAG had to either cancel or postpone all major events in Q3/20 due to the corona-related restrictions in the live entertainment industry this did not come as a surprise. We had already anticipated a substantial decline as well (MONe: EUR 4.5m). CTS Eventim and Live Nation, the two much bigger competitors, also had to post a significant downturn in sales in Q3/20 of -92.0% and -95.1% yoy respectively. On the bottom line, DEAG suffered a significant decline in EBITDA of -87.2% yoy in Q3/20 (MONe: -83.5% to EUR 0.8m). However, the company remained in positive territory at EUR 0.6m thanks to a stringent management of selling, general and administration expenses as well as a comprehensive insurance coverage (EBITDA CTS: EUR -15.0m; Live Nation: EUR -384.5m). Liquid funds remained stable after nine months at EUR 41.6m (30.06.2020: EUR 39.9m), not least because of the heavily reduced SGA costs (-48.7% yoy to EUR 4.3m) as well as raising of external capital of some EUR 2m.
Although the “lockdown light” has been extended until the end of December, DEAG confirmed its annual target, thus expecting EBITDA to at least break even. As the company had already reported an EBITDA of EUR 0.3m after nine months and is expected to receive insurance benefits in the final quarter due to the cancelled „Christmas Gardens“ plus the financial assistance in November and December announced by the German government, we stick to our forecast of a full-year EBITDA of EUR 0.8m. Whilst there is still no visibility as to when the live entertainment industry will see a revival next year, DEAG already has a sales basis of over EUR 100m resulting from events already planned. In combination with vaccines that will become available soon as well as reliable rapid tests, DEAG should be well positioned with a view to 2021, which is why we keep our forecasts unchanged.
Conclusion: The weak operating development in Q3/20 is not surprising and already priced in by the heavy drop in share price. Having in mind the foreseeable recovery in 2021 and 2022 we stick to our turnaround scenario and confirm our buy recommendation with an unchanged price target of EUR 4.10.
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Medien (Film, Musik) , A0Z23G , LOUD , XETR:ERMK