Entertainment One no longer a one pig show, Credit Suisse says

Analysts at Credit Suisse hiked their target price on shares of Entertainment One, telling clients it was no longer a one pig show, given the rapid growth of its PJ Masks franchise.

"The Family business continues to be Entertainment One's fastest growing, most profitable business. The rapid growth of PJMasks should encourage investors as it diversifies the Family business which has previously relied on one show (Peppa Pig)."

Following the film and TV producer's first half financials, the Swiss broker lifted its earnings per share forecasts for 2018 and 2019 by 5% and 11%, respectively.

In turn, that saw their target price - which was based on a discounted cash flow methodology - for the stock improve 205p to 280p.

Some of the other assumptions underlying the DCF valuation were a weighted average cost of capital of 10.4% and a terminal value of 2%, with Credit Suisse specifically stating that EPS revisions were the main driver behind the higher target price.

Potentially, there was also upside to be had from the "rebalancing" of the Film unit away from distribution and towards production, because it would allow the company to enjoy the upside from selling the shows it owns globally.

However, the broker kept its recommendation at 'neutral'.

"At our target price Entertainment One trades on 9x FY19 EV/EBITDA (excluding Entertainment One's minority interests), 5% FY19 FCF yield which we believe fairly reflects the potential risks surrounding the restructuring of the film business offset by potential takeover upside and strong growth in the Family business. Our Blue Sky valuation is 395p and our Grey Sky valuation is 160p."