Strategic Investment by Sun Seven Stars Improves the Outlook for YOU On Demand

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Analyst Coverage: YOU On Demand Holdings Inc. (NASDAQ CM: YOD)

 

Summary:

YOU On Demand Holdings Inc. (NASDAQ CM: YOD) is a multi-platform entertainment service company delivering premium content, including leading Hollywood movie titles, to customers across China via subscription and transactional streaming services.  The company has content distribution agreements in place with many of the top Hollywood studios including Disney, Paramount Pictures, NBC Universal, Twentieth Century Fox Television Distribution, Miramax, and a broad selection of the best content from Chinese filmmakers.  They have a comprehensive end-to-end secure delivery system, governmental partnerships and approvals and offers additional value-added services.

 

YOU On Demand has a current market capitalization of $52.9 million with 28.9 million shares outstanding. Its average daily trading volume is 44,234 shares.

 

 

Financial Highlights (2015):

Revenue: 4.6 million

Gross Profit: 0.9 million

Net Income: -8.1 million

Cash and Cash Equivalents: 3.8 million

Long Term Debt: 0.0 million

 

Recent News and Analysis:

You On Demand reported full year results for 2015 on March 30.  The company grew revenues 135% year-over-year and net loss decreased to $8.5 million vs $13.0 million in the previous year.

The company’s senior management and board has undergone a major overhaul since the strategic investment by Bruno Wu’s Sun Seven Stars Media Group.  Sun Seven Stars invested $10 million in the company at $2.20/share and received 2 year warrants to purchase an additional 1,818,182 shares at $2.75/share and a 6-month promissory note which will convert into 9.208,860 shares of YOD stock in exchange for license rights to content control by Seven Stars.  On January 12, Mr. Wu and Jian Ren Fan were added to the board of directors and Wu was elected chairman.  The company’s founder, Shane McMahon, became Vice Chairman of the company while Xeusong Song stepped down as Executive Chairman but remained on the board.  On January 26^th, Mingcheng Tao was appointed CEO and the size of the board was increased from 7 to 9.  Tao and Ms. Pao-Yun Wang were appointed to the board of directors.  On March 28^th, Ms. Mei Chen was appointed CFO and Mr. Bing Yan was named President of YOU On Demand’s newly formed e-commerce division.

 

Conclusions:

The investment in YOD by Sun Seven Stars Media and Bruno Wu give the company badly needed cash, a new strategic vision, and a new management team and board to execute the plan.  There are exciting growth opportunities in the company’s home market in China as well as markets outside of China.  The cash and content that Sun Seven Stars have contributed improve the prospects for YOD.  The premium strike price on Sun Seven Stars warrants point to the confidence that Wu has that he can drive improved results over the next 2 years and beyond.  There are currently 2 analysts covering the company according to Thomson/First Call.  The median price target is $5 which is more than 150% above current levels.  Simply reaching the strike price of the warrants ($2.75) would result in a 50% move in the stock.

Sources:

1. http://app.quotemedia.com/quotetools/newsStoryPopup.go?storyId=83897962&topic=YOD&symbology=null&cp=null&webmasterId=92243
2. http://app.quotemedia.com/quotetools/newsStoryPopup.go?storyId=83840325&topic=YOD&symbology=null&cp=null&webmasterId=92243
3. http://app.quotemedia.com/quotetools/newsStoryPopup.go?storyId=82224528&topic=YOD&symbology=null&cp=null&webmasterId=92243
4. http://app.quotemedia.com/quotetools/newsStoryPopup.go?storyId=81712483&topic=YOD&symbology=null&cp=null&webmasterId=92243
5. http://app.quotemedia.com/quotetools/newsStoryPopup.go?storyId=81421964&topic=YOD&symbology=null&cp=null&webmasterId=92243
6. YOD Form 10-K filed March 30, 2016
7. https://finance.yahoo.com/q;_ylt=Ano_zwE526nkO_sgresmhSl.FJF4?uhb=uhb2&fr=uh3_finance_vert_gs_ctrl2_e&type=2button&s=yod
8. https://finance.yahoo.com/q/ao?s=YOD+Analyst+Opinion
9. http://seekingalpha.com/article/3962224-demands-yod-ceo-mingcheng-tao-q4-2015-results-earnings-call-transcript?part=single

 

 

 

 

 

 

 

 

 

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