The investment bank that’s been most critical of Hipgnosis Songs Fund… just upgraded Hipgnosis Songs Fund to ‘positive’
It is fair to suggest that Hipgnosis Song Foundation (HSF), the UK-listed entity that owns more than $2 billion worth of song rights (and income streams), has come under more scrutiny from an investment bank than any other. in the past few years.
US-headquartered Stifel hasn’t been shy about voicing its pessimism towards HSF since the financial firm downgraded its view on the music company’s stock in early 2021 – via a lead report Financial Times guess: “Stifel is worried that the Hipgnosis Song Foundation is out of tune.”
Since then, Stifel analysts have repeatedly appeared in the financial media to question, among other issues, HSF’s cash flow record, its claims. valuationand its decided to buy back shares last year use increased debt.
Now, however, the story has changed a bit.
Stifel today (January 19) released a report, in which it expressed no small optimism about the direction of the Hipgnosis Songs Fund – and even encouraged investors to consider buying shares of the company. company.
HSF-themed report, titled ‘Revenue shows signs of stabilizing: It’s time to dip your feet’saw Stifel upgrade Hipgnosis Songs Fund stock to ‘Positive’.
The report suggests that Hipgnosis’ Recently agreed revolving credit facility — which gave the company an additional 100 million in spendability by the end of 2022 and is guaranteed at a fixed interest rate — seems like a smart move for the company. Merck Mercuriadis‘ The company.
The increased size of that RCF, combined with the fixation of interest costs on the debt, plus the proactive “hedging”. [of] Dividend costs through the pound’s turbulence in Q4 mean that “HSF’s short-term dividend payments are guaranteed,” Stifel said.
Stifel notes “signals of revenue growth” and stability at Hipgnosis, as reflected in Music company’s latest financial figures for six months to the end of September 2022.
Stifel draws special attention to improving HSF’s ‘permanent revenue’ or PFAR (see below).
When these improved earnings are combined with expectations that overall interest rates will peak (and then fall) this year, Stifel thinks market sentiment could now improve for HSF stock (i.e. the stock price of this company will increase).
Stifel went on to question HSF’s stated NAV (Net Asset Value), noting that if this drops 10%, Hipgnosis will no longer have enough free money from its recent RCF to pay its dividend, means “pressure on” [Hipgnosis finding the money for] dividends may occur as working capital remains tight”.
Importantly, however, Stifel suggests that this outcome “seems unlikely at this stage”.
In encouraging investors to consider buying shares of the Hipgnosis Songs Fund, Stifel said that “while downside risks remain, they have subsided.” Stifel now expects that the stock price is GBP 1.00 arrive GBP 1.10 for HSF can be justified. (HSF’s current share price is at GBP £0.8677 on the London Stock Exchange, down from the highest £1,292 in November 2021.)
The Hipgnosis Songs Fund is one of two capital funds deployed by an investment manager – Hipgnosis Song Management – to buy music rights.
The second of which is a private vehicle funded by Blackstone: Hipgnosis Songs Capital (HSC).
After acquiring catalogs created by music icons like Leonard Cohen and Justin Timberlake, reports late last year suggested that HSC had get close to getting a song catalog from Justin Bieber for a price in the region of $200 million.Global Music Business
