On Tuesday, November 17, 2020, QYOU Media Inc. (TSXV:QYOU) announced that viewership of The Q India grew by 88% over the prior five-week period
SmallCapPower | November 19, 2020: The Q India viewership grows 88% over the past five weeks. Q India’s linear channel achieved viewership growth of 88% over 5 weeks as measured by Broadcast Audience Research Council (BARC). BARC ratings are considered the Indian equivalent of Nielsen TV ratings in the US. Average time spent viewing increased by 66% to 50 min from 30 min per session. This is a significant milestone as The Q India’s average time spent viewing is top among its peers and is 20% – 30% greater than established media companies such as MTV, HBO, and Sony (Figure 1). Furthermore, total impressions are up 85% to 11.3M from 6.1M five weeks prior. This follows an announcement from September 23, 2020, (Link to our note) when (TSXV:QYOU) announced a 668% increase in viewership in the 5-weeks prior. The continued viewership growth comes on the strength of several hit programs produced by The Q India’s 300+ content partners, who produce content on a wide variety of topics including: travel and leisure, comedy, cuisine, celebrity gossip, and mini serials.
In our view, QYOU Media is a prime takeover target for a large media conglomerate looking for access to Indian Millennials. Established Indian media companies such as Mahindra Entertainment and US Media companies such as MTV—Viacom, Bindaas—Disney, HBO—Warner are looking to capitalize on the market for Indian millennials. We believe that such conglomerates are not willing to build out their own brands to target the Young Indian audience and instead would rather pay a premium for an established brand such as The Q India for the lifetime value of its audience.
Cheddar’s VC financing rounds and purchase by Altice, illustrate the premium media conglomerates are willing to pay for an established Millennial brand. Cheddar Inc is a Millennial-focused digital news network, dubbed the “CNBC for Millennials.” Cheddar focuses on business news and headlines, and is available through over-the-top devices (online, SmartTVs, tablets, phones, etc), with 19 hours of programming per day. Altice USA is one of the largest broadband communications and video services providers in the United States delivering content to 4.9M residential and business customers.
Source: www.techcrunch.com, Ubika Research
Cheddar’s valuation increased by 13-fold from its Series A to its takeover by Altice. Cheddar is the best comparable transaction based on the target demographic, similar distribution channels, and device reach. Cheddar raised ~$55M in funding across four venture financing rounds with an average premium of ~100% for each round. Cheddar was acquired by Altice in August 2019, at a 25% premium over its Series D round. QYOU Media with an even larger distribution reach in India (~1B combined), similar demographics (Millennial/Gen Z Indians 20-30 years old), and existence in an emerging market with M&A growth expected to outpace that of the United States, lead us to believe that QYOU could be a prime candidate for a similar takeover by a large-cap media player such as Mahindra Entertainment, once the Company executes on its India strategy within the next two to three years.
Undervalued based on comparable M&A transactions. We selected transactions in the media and entertainment, distribution, and content production space, which we believe to be representative of QYOU Media. Analysis of comparable transactions over the past 10 years, indicates the mean LTM revenue and EBITDA takeout multiples for media and entertainment companies are 5.4x and 29.9x, respectively. Based on management’s preliminary revenue estimates, QYOU Media is currently trading at a 0.7x F2022E EV/Revenue multiple. This valuation gap should narrow as QYOU continues to successfully execute its Q India strategy of continued viewership growth and monetization of its platform via advertising sales.
QYOU has the potential for a premium takeout multiple. We believe that The Q India, if purchase by a media conglomerate, could likely receive a substantial premium to the average takeout multiple in our M&A table (5.4x EV/Sales+). Historically, companies focused on youth programming have received premium takeout multiples. Indian and US media conglomerates who are looking to diversify from the mature US market and are already competing with The Q India could become potential acquirers. Top conglomerates include: Mahindra Entertainment, MTV –Viacom, Bindass – Disney, Zoom – Times of India, HBO – Warner, SonyPix – Sony (Figure 3). These companies are wiling to pay substantial multiples for top Millennial brands. This is due to the longer potential lifetime value of the audience. With average time spent viewing already 20% – 30% greater than established media companies such as MTV, HBO, and Sony (Figure 3), we believe that The Q India is quickly becoming India’s next top Millennial brand.
Company Description
QYOU Media Inc. is a media company focused, via its 88% owned subsidiary QYOU Media India Pvt. Ltd., on ‘Young Indians’ being the approximately 400M 20 to 30-year old’s who are a subset of the Millennial and Gen Z market in India. QYOU Media produces ‘The Q India’, a Hindi-language television channel with a growing VOD content library, with over 800 programs and counting, that is now available to approximately 610M users via 55M television homes with partners including TATA Sky, Airtel DTH & SitiNetworks; 355M OTT users via platforms including MX Player, ZEE5 and Dish Watcho; and 200 million users on mobile and digital platforms including JioTV, Airtel Xstream, SNAP and Chingari.
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