Kino Polska TV SA

TV broadcasting company with 25% ROE trading at 5x P/E, 1.2x P/B.

Kino Polska, majority-owned by the Canal+ Group, distributes and produces content for television, video on demand (VOD) platforms, streaming services and cinemas, and sells programming licenses. It also broadcasts thematic TV channels distributed in digital terrestrial television, cable networks and satellite platforms. The main TV channels include Kino Polska, Kino Polska Musyka, Zoom TV, Stopklatka, Kino TV, and Filmbox. It is quite a niche market player, with a 2.58% share of the Polish market in 2024. In 2024, advertising amounted to 43.2% of revenue. Geographically, while the main market is Poland, the Company also generated 28% of its revenue in international markets, including Spain, Hungary, the Czech Republic, Slovakia, the United Arab Emirates, Serbia, and Romania.

Financial Overview

The Company’s historical financial performance is strong. In a sector that is avoided due to the shift towards streaming and competition from the likes of Netflix or Disney+, Kino Polska has managed to grow the top-line consistently over the past decade while maintaining a solid operating margin, and while keeping capex low, which has resulted in very strong cash flow generation, as well as a consistently high ROE. Kino Polska has benefited from three advantages: (i) Polish viewers consume much more linear content than viewers in other countries; (ii) Polish viewers have a preference for local series, entertainment shows and news. The Company owns one of the largest catalogues of Polish film content (movies, series, documentaries). As the Company also produces content that is supplied to streaming platforms both in Poland and other countries, the expansion of streaming platforms also supports its business to some extent; and (iii) Through its partnership with the Canal+ Group, has exclusive access to high-quality international movie content in Poland.

Kino Polska has done two acquisitions over the past decade - Zoom TV, acquired in FY16; and Stopklatka, purchased in FY18. Both acquisitions enabled the Company to grow through expanding its channel offerings and content distribution capabilities, successfully generating synergies. While the Company doesn’t repurchase shares, it also doesn’t issue any, and pays a dividend.

Management & Ownership

SPI International initially acquired a controlling stake in Kino Polska in 2007, and over time became a majority shareholder, holding around 66% of the shares. In September 2021, Canal+ acquired a 70% stake in SPI International, and then acquired the remaining 30% in April 2023. Therefore, Kino Polska is now in effect indirectly controlled by the Canal+ Group.

The Company’s CEO is Erwan Luherne, a long-time executive within the Canal+ Group, who was appointed in 2023, once Canal+ took full control of SPI International. From what I can gather, he supports optimizing synergies among Canal+ Group affiliates; enhancing content access and distribution; expanding into digital platforms; and last but not least, operational efficiency and profitability.

Prospects & Valuation

Going forward, the strategic goal is to maintain an audience market share of 2.5-3%. To that end, management aims to invest in exclusive content and develop existing channels by increasing its presence on digital and cable platforms. In April, management stated that in the first few months of 2025, they were seeing the positive trends from 2024 continuing. For a company trading at ca 5x trailing earnings, that’s not bad.

Kino Polska has a small net cash position of ca PLN8m, however it also has cash pooling loans amounting to PLN105m - in effect cash that it owns, but that was pooled within the wider Canal+ Group cash pool. This compares to a current market cap of only ca PLN360m, so it’s a substantial part of the market cap. If we adjust for that, I find a trailing EV/EBIT of 2.7x. That’s incredibly cheap, especially for a company with a track record of strong growth. While there are concerns about potential conflicts of interest with Canal+ regarding the allocation of these funds, these concerns are partly mitigated by the fact that the Company does pay a dividend - minority shareholders are not being overlooked.

Conclusion

Kino Polska benefits from an excellent track record, as measured by a high and stable ROE over the past decade; satisfactory growth prospects at least in the short-term; low leverage; and most of all, a very low valuation. That fits right into my portfolio - it’s been my experience so far that buying companies with returns on equity >20% trading at mid-single digit multiples leads to good outcomes, on average.

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Portfolio Update

I’ve recently sold my Tarczynski stake as I wasn’t impressed by the significant restatement of earnings disclosed in the 2024 annual report. Tarczynski’s underlying performance is still solid and the price is still low, but I saw a better risk/reward elsewhere: I’ve reallocated the proceeds towards an increased stake in Renold PLC (my last write-up - now up significantly following the recent announcement of nonbinding takeover bids) and a new position in Kino Polska.