Motive Television: Slow To Come Through In Contracts

Rising industry interest in Motive Television PLC's (MTV.L) technologies (branded as Television Anytime Anywhere) has been slow to come through in contracts. Delays mean a cut in our 2012 estimates. Cash outflow continues short term, but has been stemmed by two equity placings this year, the latest this month. But, recent contracts (with CME and Granite) should mark a turning point, widening acceptance of the technology and increasing confidence in forecasts. The Granite win means our 2013 estimates are unchanged. On 2014 estimates, the valuation ranges from 0.07p and 0.46p.

Motive at a turning point – key contracts signed
Motive has recently signed contracts with CME in Eastern Europe and with Granite Broadcasting Corp (GBC) in the USA, validating acceptance of its recurring revenue business model and technology in two main markets. After delays in signing contracts, they have added some much needed certainty to forecasts from 2013 onwards. Together they account for 61% of projected group revenue in 2014.

Potential full ownership of IP at a good price
On 3 July, Motive exercised its call option over the minority holding in Motive Television SL held by Banca Civica at the nominal value of €70,116, meaning Motive will own 100% of its intellectual property (IP). However, on 16 July Banca Civica announced its intention to exercise its put option over the holding with a potential cost of €2.1m. The issue is unresolved. Motive has filed in the Spanish courts to enforce its acquisition.

Estimates: 2012 down, 2013 virtually unchanged, 2014 up
Industry interest in Motive’s technology continues to rise, but delays in winning new contracts and delays with existing contracts, mean a 48% cut in our 2012 revenue estimates to £2.4m and a rise in estimated pre-tax losses from £1.4m to £2.4m. Following the August equity placing, which raised £0.7m, net debt estimates rise from £3.0m to £3.5m (including £2.6m of convertible loan notes, or CLNs). Our 2013 estimates are virtually unchanged, due to the benefits of the contract with Granite. This contract could boost 2014 and see the group moving into profit and net cash.

Valuation range of 0.07p to 0.46p on 2014 estimates
Comparative EV/revenue ratings and P/E ratios for a range of larger broadcasting technology companies suggest a broad valuation range at this stage in Motive’s development, based on our 2014 estimates.

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