Sector financial performance:

This company, which primarily produces content/programming related to lifestyle and distributes by cable TV and internet platform earning revenue from affiliate fees (based on subscription) and advertising, has been grouped into content maker – nature sector in video &audio goods and service industry.
Generally, companies in this sector have experienced weak demand, especially from cable subscribers, for their channels. However, some of major channels providers seem to still be able to raise contractual rate to offset the declining subscribers.
We also have seen some of companies in this sector have been able to raise price of advertising to improve their advertising revenue while the industry presents a downturning trend for most of companies in this sector.
The leaving of subscribers of paid TV channels made some of channels companies able to raise rate but also caused intensive competition among companies in this sector for programming quality, which may be the reason behind increasing programming costs.
Typical gross margin seems to be declining since 2016, which present an about 53% gross margin in 2018. With the SG&A as percentage of 26%, we see the operating margin is about 27% down from about 32% in 2015.

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Company performance:

It seems that demand, from cable TV subscribers, for programming/channels of this company has been weak as indicated by gradually declining subscribers/viewers. However, this company has been benefiting from rising contractual rate of its channels due to higher quality content provided.
Fiscal 2017 compared with fiscal 2016
Net revenue increased about 5% attributable to increase of 4% in advertising revenue due to acquisition and increased pricing and increase of about 7% in distribution revenue due to increased rate and increase in OTT.
Fiscal 2016 compared with fiscal 2015
Net revenue increased about 13% attributable to increase of 17% in advertising revenue due to acquisition and increased pricing and increase of about 2% in distribution revenue due to acquisition.

Stock performance

Based on acquisition price of $90 per share, it implies an enterprise price/EBI ratio of about 16(12 month trailing). We think it may be overvalued.

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