Bank: Canal+ on a “super aggregation” strategy
January 9, 2025
A report from analysts at investment bank BNP Paribas on Canal+ says the broadcaster is now on a “super aggregation” strategy. Its share price, since its debut on the London Stock Exchange on December 16th 2024, has been in a depressed state. Currently (January 8th) its shares are trading down 4.6 per cent at £2. They opened on December 16th at £2.90, but quickly fell back. The bank’s report talks of a new target price of £2.80.
“Canal+ has evolved from a French pay-TV broadcaster to a home entertainment leader in Europe and Africa with a strong premium content and OTT aggregation model. Its consolidation strategy aims to grow subscribers from 27 million to c100 million, boosting profitability and cash flows. AI could enhance content economics. We initiate with 280p Target Price, after the demerger from Vivendi on 16 Dec,” said analyst Sami Kassab.
“Despite competitive challenges from the digital transition towards OTT, Canal+ strategy of ‘super aggregation; and premium content has driven subscriber and revenue growth in Europe. We forecast 1.6 percent revenue CAGR [over the period] 24-28e (2.5 per cent when combined with MultiChoice) with faster growth in Africa (c60 per cent of group proforma EBITA) more than offsetting ARPU dilution due to the transition from high-yielding satellite subscribers to OTT & IPTV. In the age of Generative AI, we believe management efforts on cost optimisation should drive 170bp margin expansion to 9.4 per cent in 2028e (standalone),” he added.
The report suggests that management’s active consolidation strategy in Africa (mandatory offer on MultiChoice), Asia (call option on Viu) and Scandinavia (Viaplay) could see the group double its subscriber base and become a global leader in home entertainment, noting: “We believe MultiChoice consolidation should improve content economics and drive €200 million+ of cost synergies.”
“We believe technical selling factors have contributed to Canal+ difficult start as a listed entity. Canal+ trades on 3x EV/EBITDA26, at a discount to all peers. We believe the current low valuation reflects a discount due to liquidity, M&A, and governance concerns, as well as investors’ excessive focus on 2025 one-off revenue pressure and concerns around Netflix’s dominance. Management guidance on MultiChoice cost synergies and improving profitability are key catalysts. The non-fungibility of entertainment content leads us to believe that Canal+ can remain a leader in the age of Netflix,” the bank added.
The bank’s thesis is based on broadcaster’s existing position. “Canal+ is a major player in the global home entertainment market, a growing market characterised by the ongoing transition from linear pay-TV to on-demand OTT services. According to Omdia, a market research company, the amount of time spent watching video per day has grown from 6h29 minutes in 2016 to 9h35 minutes in 2023 and is likely to continue expanding as screen availability increases in cars and planes. While new(ish) genres such as short-form video, user-generated content, gaming, and social networks increasingly compete against filmed entertainment, premium video still drives about half of daily consumption. Spending on Home Entertainment in Europe is a growing market.”
“Cognisant of the changes of the past decade in the US market, Canal+ has been able to adopt a successful strategy based on premium, generalist content coupled with an OTT content aggregation strategy. This has enabled the group to adapt to this new market environment while growing its subscriber base. With close to 27 million subscribers to its pay-TV and OTT platforms, the group remains a leader in the home entertainment markets in which it operates in Europe and Africa. Its industry consolidation strategy (ongoing mandatory offer for MultiChoice in Africa, call option to acquire control of Viu in Asia, clear path to control Viaplay in Scandinavia) should help the group cross the 50m subscriber mark in the near term and progress towards management’s ambition to reach closer to 100m subscribers over time and reinforce its position as a top tier global player,” added the bank.
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