Ubika Alpha has initiated coverage of shares of QYOU Media Inc. (TSXV:QYOU) with a BUY rating and a target price of $0.30 per share, implying 400% upside
SmallCapPower | January 8, 2020: QYOU Media Inc. (TSXV:QYOU) (OTCQB:QYOUF) is a media company focused, via its 82% owned subsidiary QYOU India, 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 and VOD library that is now available to approximately 500 million device holders (satellite and cable distribution footprints as well as mobile phone and OTT (over-the-top streaming portals) of which we estimate 65% of device holders are ‘Young Indians’. The Q India was launched three years ago by industry veterans from Lionsgate, MTV, Sony and Disney with a four-part strategic plan and is now, after having successfully executed Phases One to Three, poised to enter Phase Four of its plan — the monetization phase via advertising sales. We believe investors have completely overlooked what has been built in the last three years and the massive potential that is about to be exploited.
The Q India is on track with respect to its Four-Phase Strategy to create a powerful media brand appealing to Young Indians (20 to 30 years old). The Q India was launched in 2017 after the Company identified a massive opportunity in India.
The four phases of this strategy include:
- Identify a massive opportunity (no dominate media brand for Young Indians exists today);
- Build a localized (initially Hindi) linear television channel by curating and licensing high quality and entertaining short form video content from India’s top digital creators;
- Secure pan-Indian distribution of the channel and its library of VOD onto cable, satellite, mobile and OTT platforms;
- Monetize via advertising sales.
QYOU Media is currently entering the 4th step in its India strategy.
Until now, only major media companies and Hollywood studios have had the opportunity to exploit the bonanza media market of India. For years, large-cap media has been pulling hundreds of millions of dollars in profits out of India. In fact, the broadcast television network groups are now each worth billions (e.g. Star, US$10-14B, Zee Networks, US$5.5B). QYOU Media allows investors a way to immediately participate in the explosive TV, digital media, OTT/streaming industries that would otherwise be unavailable.
Large market opportunity – explosive media & video growth in India is coming. According to E&Y, the Indian Media and Entertainment sector is expected to grow at an annualized rate of 12.4% through to 2021E, compared with the global average of 4.2%. The over-the-top (OTT) sector in India is expected to grow at 24.9% per year until 2021E. QYOU Media launched “The Q India” to take advantage of this explosive growth opportunity.
We are initiating coverage with a BUY recommendation and $0.30 price target. Our $0.30 price target is based on an average of three valuation methodologies (Figure 12, Page 11). We utilized a comparables valuation with a F2022E EV/Sales multiple of 2.5x discounted at 15%. We used a 15% discount rate to take into consideration the riskiness of the start-up nature of the company doing business in an emerging-markets environment. We used a 5% terminal growth rate, which is supported by India’s historical GDP (6.1% annually since 1951).
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