Nathanial August’s detailed notes from the 2018 Sohn Conference, discussing his new short Eros International plc (NYSE:EROS).
Q1 hedge fund letters, conference, scoops etc
Premium coverage on the 2018 Sohn Conference in NY can be found here
Sohn Conference 2018 main event here
I got this fuking thorn in my side and it refers to Eros International, LLC (Eros). A little bit of background – production and distribution in Bollywood films. It also has an OTT platform, Eros Now – “Netflix of India”. It reports under three segments – theatrical, TV syndication, digital & ancillary.
With sum of parts valuation, implied share price of $10.93, only 7% below current so why not like? First Question, what are theatrical revenues? The company has shifted towards low budget films (3/4 produced on YTD basis) – cost less than $1MM in production costs. Despite this shift, theatrical revenues are at an all-time record at $3.5MM per film. And yet, the number of films have collapsed by 2/3s to only 21 on an LTM basis. And this is a small enough # of films to go through 1 by 1 to get a view on how those films did.
I took the most aggressive estimates I can find on third party data. Sarkar 3 is most important – distributor typically keeps 50% of box office, so $1.4MM to EROS and then so on to get to $3.4MM in distributor share of revenue estimate for Q1’18. As compared to the $23.6MM that EROS reported. That is an 86% discrepancy. Things aren’t better for the second quarter – $9.3MM vs. $19MM as reported by the company (52% discrepancy). And most recent quarter, distributors share estimate was 0.3MM compared to $12.9MM reported by the company (98% discrepancy). Company reported average of $3.5MM per firm. Independent estimates about $800K per film. Between 2009 – 2011, reported average theatrical revenue of $600K. The company’s DS0s have increased 99 in FY08 from to 407 in most recent quarter.
