DEAG Deutsche Entertainment AG

" Media "

Published: 14th June 2019

WKN: A0Z23G | ISIN: DE000A0Z23G6 | Bloomberg: ERMK GY BUY Before: BUY I-Motion deal is a good strategic fit for DEAG Price Target EUR 5.20 (5.20)

Share price* EUR 4.49 (+16%) Acquisition of 50.1% share in I-Motion GmbH: On June 7, the company announced " Company Update" it had acquired a 50.1% share in I-Motion GmbH, the German operative unit of *last XETRA closing price In LiveStyle Inc. I-Motion was founded over 25 years ago and is an organiser of Change 2019e 2020e 2021e electronic music events. The three most well-known events are "Nature One" (since Sales 3.7% 5.1% 4.8% EBIT 5.2% 8.4% 8.5% 1995), "Mayday" (since 1991) and "Ruhr-in-love" (since 2003). These three annual EPS 1.0% 7.3% 3.4% events alone generate ticket sales of over 100,000 a year.

Details of the transaction: DEAG expects revenue potential of EUR 15 m from I- 5 Motion. We believe that a margin of 6-8% can be achieved on an EBITDA level, 4,5 because it is not only the own IPs that can be used, but also proceeds from food 4 and drink, merchandise, and sponsorship. In the 25 year history the revenues 3,5 3 ranged between EUR 12-15m. In 2017 revenues stood at EUR 13.3m. Given the fact 2,5

that there were around 6% less visitors in 2018, we assume that revenues will have 2 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 been at EUR 12.6m in 2018e. For 2019e we except revenues to grow, however, DEAG Deutsche Entertainment Aktiengesellschaft MSCI Europe / Media & Entertainment -IG Germany SDAX mainly because NatureOne will be celebrating its 25th anniversary event. The 20th Source: Factset anniversary event saw a 14% hike in visitors YoY. We expect the increase to be Basic share data about 12% in 2019e (rising to 60.5k, 2018: 54k) with corresponding revenue of around EUR 14.3m. An estimated margin of 7% would put the EBITDA at around Number of shares (million) 19.1 Free Float (in %) 35% EUR 1m. Based on the assumption that the multiple is at the top end of the range Market Cap (in million EUR) 83.6 of 6-8x EBITDA, the purchase price for a 100% share would be at EUR 8.5-10m. This Trading volume (Ø) 28,500 means that DEAG must have paid around EUR 4.5-5m for a 50.1% share. High (EUR, 52 weeks) 4.64 Low (EUR, 52 weeks) 2.20 Estimates for I-Motion: We assume that DEAG can consolidate significantly more than half of turnover for 2019e. We believe revenues of EUR 10m should be realistic Shareholder structure for the rest of the year. For 2019e we are working on an EBITDA margin of 6%, Apeiron Investment Group 19.0% putting the EBITDA contribution at around EUR 600k. For 2020e we see I-Motion Plutus Holdings 2 10.4% Free float, others 70.6% (plus contribution from myticket) achieving turnover of EUR 15m with an EBITDA of 7%, or EUR 1m. For the time being, we will leave the revenues/EBITDA estimates Corporate calendar for I-Motion stable at EUR 15m/revenues and EUR 1m/EBITDA. AGM 27.06.2019 BUY confirmed: In the course or the update to our model as part of the I-Motion H1 19 report 30.08.2019 takeover, we also reviewed the operational turnover development and adjusted it slightly. This results in an increase in revenues in 2019e of just EUR 8m. On an Analyst EBITDA level this has an effect of around EUR 200k. Our fair value from the peer Marcus Silbe, CEFA group evaluation is currently at EUR 5.34. We therefore confirm our BUY Head of Research recommendation. [email protected] +49 (0) 69 - 920 389 12

GY End: 31.12;.in EURm CAGR (18-21e) 2016 2017 2018 2019e 2020e 2021e Contact Turnover 9.2% 179.5 159.8 200.2 226.6 248.2 260.6 FMR Frankfurt Main Research AG EBITDA 7.2% 5.2 6.5 14.6 14.6 17.0 18.0 Schillerstrasse 16 Margin 2.9% 4.1% 7.3% 6.4% 6.9% 6.9% 60313 Frankfurt am Main Germany EBIT 10.0% 3.7 5.1 10.6 10.8 13.2 14.1 Margin 2.1% 3.2% 5.3% 4.8% 5.3% 5.4% +49 (0) 69 - 920 389 10 net result n.m. -3.6 -2.3 3.5 3.0 4.0 4.2 www.fmr-research.de

EPS n.m. -0.22 -0.12 0.20 0.16 0.21 0.23 Dividend per share 0.00 0.00 0.00 0.00 0.00 0.00 In cooperation with: EV/Sales 0.4 0.4 0.4 0.4 0.3 0.2 EV/EBITDA n.m. 10.5 5.6 5.7 4.3 3.5 P/E n.m. n.m. n.m. 27.8 20.9 19.7 Net debt/EBITDA n.m. 2.3 0.1 0.0 0.6 1.2 Source: DEAG, FMR

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DEAG Deutsche Entertainment AG

Valuation After integrating the data from the I-Motion transaction we arrive at a new fair value from the peer group valuation of EUR 5.34, meaning the value has risen by a further 20 cent. Excluding the maintenance adjustments, the fair value would even have increased to approx. EUR 5.50 per share.

We will leave our target price at EUR 5.20 for now, since this currently still represents upward potential of approx 16%. We still want to wait until we have the latest figures for Ruhr-in-Love and Nature One, since these account for a substantial share of I-Motion's annual performance.

Peer Group Valuation

Company name P/E EV/EBITDA EV/EBIT 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E

DEAG (consensus) 31.0 19.5 15.5 7.0 5.4 4.2 9.9 7.2 5.4 Current Premium/Discount vs. Average peer 8.0% -22.3% -31.4% -47.8% -54.6% -71.4% -62.3% -66.2% -68.7% vs. Median peer 8.0% -22.3% -31.4% -47.8% -54.6% -63.4% -62.3% -66.2% -68.7%

CTS Eventim AG & Co. KGaA 28.7 25.1 22.6 11.9 10.5 9.4 14.5 12.6 11.2 Live Nation Entertainment, Inc. n.m. n.m. n.m. 14.9 13.0 11.4 38.3 29.9 23.5 Madison Square Garden Co. Class A n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. Eventbrite, Inc. Class A - - - n.m. n.m. 22.9 - n.m. n.m. Average (excl. DEAG) 28.7 25.1 22.6 13.4 11.8 14.6 26.4 21.3 17.3 Median (excl. DEAG) 28.7 25.1 22.6 13.4 11.8 11.4 26.4 21.3 17.3

EPS EBITDA EBIT in Mio. EUR, außer EPS (in EUR) 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E

DEAG: Financial estimates by FMR 0.16 0.21 0.23 14.6 17.0 18.0 10.8 13.2 14.1

Applied multiples: Peer group median 28.7 25.1 22.6 13.4 12.4 11.4 26.4 21.3 17.3 Enterprise value (derived) - - - 195.0 211.0 205.0 286.1 281.2 244.2

- Financial net debt & minority interests -12.1

Market capitalisation (derived) - - - - 198.9 - - - -

Market capitalisation (derived) 198.9 Premium (discount) vs. Peer Group -50% Fair market capitalisation 99.4 Number of shares (m) 18.6 Fair value per share (EUR) 5.34

Source: Factset, FMR

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DEAG Deutsche Entertainment AG

Appendix

P&L

in EURm 2016 2017 2018 2019e 2020e 2021e

Revenues 179.5 159.8 200.2 226.6 248.2 260.6 YoY grow th 4.3% -11.0% 25.3% 13.2% 9.5% 5.0%

Cost of revenues -148.7 -130.5 -161.7 -183.5 -198.6 -208.5 as % of revenues -82.8% -81.6% -80.8% -81.0% -80.0% -80.0%

Gross profit 30.8 29.3 38.5 43.1 49.6 52.1 as % of revenues 17.2% 18.4% 19.2% 19.0% 20.0% 20.0%

General & administrative expenses -13.6 -12.6 -16.5 -17.4 -18.6 -19.5 as % of revenues -7.6% -7.9% -8.2% -7.7% -7.5% -7.5%

Sales and marketing expenses -20.7 -13.1 -19.0 -20.9 -24.5 -25.7 as % of revenues -11.5% -8.2% -9.5% -9.2% -9.9% -9.9% Other operating income/exenses 7.2 1.4 7.6 6.2 6.7 7.2 as % of revenues 4.0% 0.9% 3.8% 2.7% 2.7% 2.8%

Reported EBITDA 5.2 6.5 14.6 14.6 17.0 18.0 as % of revenues 2.9% 4.1% 7.3% 6.4% 6.9% 6.9%

Depreciation and amortisation (incl. PPA) -1.4 -1.5 -4.0 -3.7 -3.8 -3.9 as % of revenues -0.8% -0.9% -2.0% -1.6% -1.5% -1.5%

Reported EBIT 3.7 5.1 10.6 10.8 13.2 14.1 as % of revenues 2.1% 3.2% 5.3% 4.8% 5.3% 5.4%

Net financial results incl. equity results -1.5 -2.1 -3.2 -3.5 -3.5 -3.5

EBT (Earnings before income taxes) 2.2 2.9 7.4 7.3 9.8 10.7 as % of revenues 1.2% 1.8% 3.7% 3.2% 3.9% 4.1%

Income taxes -0.5 -0.6 -0.7 -1.3 -1.8 -1.9 as % of EBT -22.1% -20.4% -9.0% -18.0% -18.0% -18.0% Income from continuing operations 1.7 2.3 6.7 6.0 8.0 8.7

Income from discontinued operations, net of taxes -3.9 -3.0 -0.1 0.0 0.0 0.0

Net income -2.2 -0.7 6.6 6.0 8.0 8.7

Minorities -1.4 -1.6 -3.1 -3.0 -4.0 -4.5

Net income attributable to shareholders -3.6 -2.3 3.5 3.0 4.0 4.2 Net margin in % -2.0% -1.4% 1.7% 1.3% 1.6% 1.6%

Shares outstanding (in m) 16.4 18.4 17.6 18.6 18.6 18.6

Basic earnings per share (EUR) -0.22 -0.12 0.20 0.16 0.21 0.23

Source: DEAG, FMR

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DEAG Deutsche Entertainment AG

Balance sheet

IFRS in EURm 2016 2017 2018 2019e 2020e 2021e

Assets

Non-current assets 44.4 48.5 69.1 81.0 80.6 80.4 as % of total assets 41.4% 36.8% 51.9% 48.1% 43.7% 39.8%

Intangible assets (incl. Goodwill) 32.0 35.0 37.1 37.6 36.4 35.2 Property, plant and equipment 1.0 2.5 19.4 26.0 26.9 27.9 Long-term investments 8.0 7.4 8.7 13.5 13.5 13.5 Income tax claims (incl. Deferred) 0.3 0.8 1.3 1.3 1.3 1.3 Other assets 3.1 2.9 2.5 2.5 2.5 2.5

Current assets 62.9 83.4 63.9 87.2 104.0 121.6 as % of total assets 58.6% 63.2% 48.1% 51.9% 56.3% 60.2%

Inventories 0.1 0.1 0.1 0.2 0.2 0.3 Accounts receivable 15.3 25.9 10.3 24.8 30.6 35.7

Other receivables and other assets 18.2 14.4 14.9 21.6 25.4 30.0

Current income tax claims 1.0 1.2 2.2 2.4 2.6 2.7 Cash and cash equivalents 28.4 41.8 36.4 38.2 45.2 52.9

Total assets 107.4 132.0 133.0 168.2 184.6 202.1

Shareholders´ equity and liabilities

Shareholders´ equity 10.7 12.6 14.9 23.2 31.2 39.9 as % of total equity and liabilities 10.0% 9.6% 11.2% 13.8% 16.9% 19.8%

Subscribed capital 16.4 18.4 18.4 18.6 18.6 18.6 Capital reserve 40.1 42.5 42.5 43.1 43.1 43.1 Accumulated and other comprehensive income -50.4 -53.4 -51.0 -48.0 -44.0 -39.8 Treasurey shares 0.0 0.0 0.0 0.0 0.0 0.0 Equity attributable to shareholders 6.0 7.5 9.9 13.7 17.7 21.9 Minorities 4.7 5.2 5.1 9.5 13.5 18.0

Current liabilities and provisions 88.8 112.7 78.4 97.8 108.4 119.1 as % of total equity and liabilities 82.7% 85.4% 59.0% 58.1% 58.7% 59.0%

Financial liabilities 20.0 22.5 14.4 10.1 10.1 10.1 Advance payments received 37.3 67.6 34.7 51.2 59.7 69.0 Accounts payable 13.6 10.5 11.9 18.9 20.7 21.7 Tax liabilities 0.9 0.6 1.0 1.1 1.2 1.4 Other provisions 10.2 6.8 8.3 9.1 10.0 11.0 Other liabilities 6.8 4.7 8.2 7.4 6.7 6.0

Non-current liabilities and provisions 7.8 6.6 39.6 47.3 45.1 43.0 as % of total equity and liabilities 7.3% 5.0% 29.8% 28.1% 24.4% 21.3%

Pension provisions and similar obligations 0.0 0.0 0.0 0.0 0.0 0.0 Financial liabilities 5.5 4.2 20.4 27.5 24.5 21.5 Deferred tax liabilities 1.6 2.2 3.3 3.9 4.7 5.7 Provisions 0.2 0.0 0.4 0.4 0.4 0.4 Other liabilities 0.5 0.3 15.5 15.5 15.5 15.5

Total equity and liabilities 107.4 132.0 133.0 168.2 184.6 202.1

Source: DEAG, FMR

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DEAG Deutsche Entertainment AG

Cash Flow Statement

in EURm 2016 2017 2018 2019e 2020e 2021e

Net income 1.7 2.3 6.7 6.0 8.0 8.7

Depreciation and amortisation 1.4 1.5 2.3 2.4 2.4 2.4

Other transactions incl. non-cash -8.7 -10.4 -3.4 0.8 1.5 1.8 Change in Working Capital 0.3 23.2 -18.9 1.5 0.1 0.0

Cash flow from operating activities -5.2 16.7 -13.3 10.7 12.1 12.9

CAPEX -3.8 -1.2 -1.8 -1.9 -2.0 -2.2

Change in consolidation, net cash 6.9 -5.1 4.6 -8.1 0.0 0.0

Other investing activities 0.1 0.9 0.1 -2.4 0.0 0.0

Cash flow from investing activities 3.2 -5.5 2.9 -12.4 -2.0 -2.2

Change in debt 2.1 0.5 14.7 2.7 -3.0 -3.0 Net proceeds from capital increase & right capital & change in capital reserve 5.5 4.5 -2.5 0.8 0.0 0.0 Acquisition of treasury shares & minority stakes 0.0 0.0 -2.1 0.0 0.0 0.0

Dividend payments -1.8 -1.7 -0.4 0.0 0.0 0.0 Other financing activities -0.9 -1.0 -1.0 0.0 0.0 0.0

Cash flow from financing activities 4.9 2.2 8.7 3.5 -3.0 -3.0

Total change in cash and cash equivalents 3.0 13.3 -1.7 1.8 7.0 7.7

Effect of exchange rate changes on cash -0.4 0.1 -0.7 0.0 0.0 0.0 Other changes in cash and cash equivalents 0.0 0.0 0.0 0.0 0.0 0.0 Cash and cash equivalents at the start of the period 25.8 28.4 41.8 36.4 38.2 45.2

Cash and cash equivalents at year´s end 28.4 41.8 39.4 38.2 45.2 52.9

Source: DEAG, FMR

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DEAG Deutsche Entertainment AG

Declaration of liability (disclaimer) and mandatory details pursuant to Section 85 Securities Trading Act (WpHG), EU Market Abuse Regulation (EU Regulation No. 596/2014), Delegated Regulation 2016/958 and Delegated Regulation 2017/565 including details of possible conflicts of interest (disclosures), the author and the responsible supervisory authority

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2. Mandatory details a) First publication: 14th June 2019, b) Time conditions of expected updates: quarterly c) Supervisory authority: Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht), Lurgiallee 12, 60439 Frankfurt am Main d) Previous analyses: No analysis was published in the 12 months before publication of this analysis that contains a recommendation for a specific investment decision which contradicts this analysis. e) The analysis was made available to the issuer, to the extent that is legally permissible, before publication and was not amended thereafter. f) All prices and price developments listed in the analysis are based on closing prices insofar as no contradictory details were provided about prices and price developments.

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(i.) has an involvement in the share capital of the issuer of at least 5 per cent;

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DEAG Deutsche Entertainment AG

(iv.) has, within the past twelve months, concluded an agreement regarding services in connection with investment banking business or received a service or performance promise from such agreement, with issuers which either themselves or the financial instruments thereof, are the subject of the financial analysis;

(v.) is in possession of a net sales or purchase position which exceeds the threshold of 0.5% of the total issued share capital of the issuer;

(vi.) has concluded an agreement regarding the preparation of investment recommendations with the issuer.

(vii.) has other significant interests with regard to the company being analysed, for example clients with the company being analysed.

Company Disclosure(s)

DEAG Deutsche Entertainment AG -

b) FMR Frankfurt Main Research AG has concluded a cooperation agreement with Oddo Seydler Bank AG, on the basis of which this financial analysis is compiled. Oddo Seydler Bank AG is acting as the agent of the issuer, which is either the subject of the financial analysis itself or its financial instruments are the subject of the financial analysis.

Neither Oddo Seydler Bank AG nor an affiliated company, nor any person who contributed to the compilation

(i.) has an involvement in the share capital of the issuer of at least 5 per cent;

(ii.) was involved in the management of a syndicate within the past five months that issued financial instruments of the issuer in the context of a public tender;

(iii.) managed financial instruments of the issuer on a market by means of concluding purchase or sale agreements:

(v.) is in possession of a net sales or purchase position which exceeds the threshold of 0.5% of the total issued share capital of the issuer;

(vi.) has concluded an agreement regarding the preparation of investment recommendations with the issuer.

(vii.) has other significant interests with regard to the company being analysed, for example clients with the company being analysed.

Company Disclosure(s)

DEAG Deutsche Entertainment AG iii, vi

4. Creation and distribution a) Responsibility for creation and distribution

FMR Frankfurt Main Research AG

Registered office: Frankfurt am Main; Commercial Register No. HRB 113537, Frankfurt am Main district court; Chairman: Marcus Silbe b) Issuer

Marcus Silbe, Head of Research, Senior Analyst c) This study may only be used for the internal purposes of the addressee within the EEA or Switzerland.

5. Investment recommendation details

Investment recommendation details - stocks:

BUY: In our opinion, the stock will demonstrate an absolute price gain of at least 10 % in a 12-month period.

HOLD: In our opinion, the stock will not exceed or fall below an absolute price gain or loss of 10% in a 12-month period.

Sell: In our opinion, the stock will demonstrate an absolute price loss of at least 10 % in a 12-month period.

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DEAG Deutsche Entertainment AG

6. Sensitivity of the evaluation parameters

The figures from profit and loss calculations, cash flow statements and balance sheets which form the basis of the company evaluation are date-related estimates and therefore subject to risks. These may change at any time without prior notice. Regardless of the evaluation methods used, there are significant risks that the price goal/trend will not be achieved within the expected time frame. The risks include unforeseeable changes with regard to competition pressure, demand for the products of an issuer and the offer situation with respect to materials required for production as well as non-occurrence of the assumed development. Such deviations may be the result of changes relating to technology and changes relating to the economy, legal situation and exchange rates. No claim is made that this statement of evaluation methods and risk factors is complete.

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8. Summary of the basis for evaluation

Individual issuers: Current and recognised evaluation methods (e.g. DCF method and Peer Group Analysis) are used for company analysis purposes. The DCF method calculates the value of the issuer based on the sum of the discounted cash flows, i.e. the cash value of the future cash flows of the issuer. The value is therefore determined on the basis of expected future cash flows and the applied discount rate. In Peer Group Analysis, issuers listed on the stock exchange are evaluated by comparing ratios (e.g. price/profit ratio, Enterprise Value/turnover, Enterprise Value/EBITDA, Enterprise Value/EBIT). The comparability of the ratios is primarily determined with reference to the business activity and economic prospects.

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