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Corus Entertainment: Strong Free Cash Flow Yield, Taking Pandemic Headwinds In Stride


  • Corus has taken a hit to advertising-related revenues as a result of the pandemic.
  • Total subscriber revenues have held steady; however, so I expect more advertisers to gradually return as the Canadian economy recovers.
  • Content production and streaming initiatives like StackTV and Nick+ have so far helped to offset cord-cutting.
  • Based on free cash flow yield of ~27%, valuation, debt paydown since 2018, and other positive attributes, there's a case for a higher share price for Corus.

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Corus Entertainment Inc. (OTCPK:CJREF) is a Canadian media and content company that operates television networks and radio stations, its own production studios, and a couple of recently-launched streaming initiatives. Like other companies in the broadcasting sector, Corus took a hit in terms of both business and stock performance in 2020 during the pandemic. 2021FQ1 revenues were down 10.2% year over year, an improvement from -15.7% in 2020FQ4, and -23.9% in 2020FQ3.

Although its stock price has just recently surpassed its pre-pandemic level, it is still well-below its peak in 2013, with a price return of around -82% and total return of -65% over the past 7 years. There have been a range of bullish SA articles over the years (with most of them mentioning the free cash flow), though clearly the pandemic threw in a curveball. With a vaccine-aided recovery still yet to get under way in Canada, it's possible that a bullish case has more room to run.

Looking at the past few years in a nutshell, Corus took on an additional C$1.4B of net debt for the acquisition of Shaw Media Inc. in 2016, and slashed its dividend from C$1.14 to C$0.24/year in 2018 as it tried to digest that. Taking a glance at previous articles, it looks like synergies and debt pay-down did not materialize as quickly as expected. Concerns about cable unbundling, and financial underperformance, may have also contributed to the slide over 2015.

As a broadcaster, it continues to face the specter of cord-cutting, which likely

This article was written by

I write about value/GARP stocks, and have been investing in stocks since around 2015 -- prior to that, I held index and mutual funds. I'm a lapsed economist based in Canada with 10+ years work experience, hold an MA in economics, and an undergraduate degree spanning economics, geography, and comp sci. My interest in stock investing came about by seeing it as a personal/intellectual challenge (and an opportunity for improved financial returns ;) -- it also defies dogmatic theories about the world. Some books that I've found worthwhile include Beating the Street (Peter Lynch), Superforecasting (Tetlock and Gardner), Buffett (Roger Lowenstein), and Common Stocks and Uncommon Profits (Philip A. Fisher), among others. Usually I lean towards value-oriented stocks, although I aim to be open-minded and opportunistic.

Analyst’s Disclosure: I am/we are long CJREF, DISCA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I'm not a financial adviser/advisor, and this post is only intended to express my own opinions. I could have overlooked key facts and/or risks, and my views could change at any time, not least because of new information that might become available. The suitability of an investment depends on your own personal circumstances and risk tolerance. You are responsible for your own due diligence!

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Comments (45)

Northern Reflections on Value profile picture
-Forward yield >6%.
-Last Q's FCF of C$88M vs. market cap of C$803M.
-Low debt and continuing to deleverage: down to 2.7x. Minus C$700M since Sept. 2018. Long run-way in the debt maturity profile.
-Stable revenue.
-No plans for major M&A: "So we're still very much of the view that the best use of our capital, as I said earlier, absent internal investment is buying back our own stock. The multiples that we see on M&A targets still appear to us to be extremely inflated... So the answer quickly would be no in M&A at this time."

Looking cheap. Anything else like this, out there?
Baloney Sandwitch profile picture
@Northern Reflections on Value No lack of cheap stocks but you already know about Molson - also a deleveraging story.
Northern Reflections on Value profile picture
@Baloney Sandwitch True, many cheap stocks out there. But in terms of extent, and with already a lot of progress on the deleveraging, Corus seems to stand out.
Baloney Sandwitch profile picture
@Northern Reflections on Value True. However Corus has the perception of a declining business. Still a PE of 5 is too low.
Nice article, thx. Listened to Q4 CC etc. Haven't fully understood implications of DISCA entry to Canada yet.

Given ND/EBITDA looks manageable, why only pay out 20% of the 250m pa FCF as a dividend? They should look to pay out at least 50% IMO. Thoughts welcome.
Northern Reflections on Value profile picture
@A2015 Thanks for reading. I don't recall them going into much detail on the Discovery arrangement so that probably doesn't make it any easier to understand... I'd expect that they aimed to put it in a positive light, and whatever they worked out involved some gives and takes.

Yeah, leverage is coming down. Sounds like their order of priorities are (1) strategic priorities (i.e. organic investment, maybe opportunistic M&A), (2) debt paydown, and (3) the current dividend level. Doesn't sound like buybacks or a dividend raise are on the horizon, anytime soon.

Note that the run-rate FCF is likely to be lower, as content spend has been ramping back up. e.g. FCF was $35M in Q4, not sure how indicative that is.
@Northern Reflections on Value thx. Corus has been retained as marketing partner. Good omens. FCF might be partly seasonal.
Baloney Sandwitch profile picture
Great article. Corus is still pretty cheap and good value. I think it can double in 2 years. Here is another recent analysis. www.gurufocus.com/...
Northern Reflections on Value profile picture
@Baloney Sandwitch Thanks for posting this link :)
Northern Reflections on Value profile picture
Note that I’ve trimmed this position, somewhat, as other opportunities have arisen…
Zetetic always profile picture
@Northern Reflections on Value , Funny, I've been adding recently. Given what the analysts have been saying, it appears that Corus' story is starting to resonate with the sell side community. Ever since cord cutting began the market clearly has not given Corus the benefit of the doubt. However, the company is finally starting to achieve revenue growth.

As I see it now, the biggest problem with the stock is the patience that it has demanded from its holders. And that's what makes a market...
Northern Reflections on Value profile picture
@Zetetic always Versus earlier in the year, some other stocks I follow have sold-off…

Corus seems to be doing alright, and they’ve upped their streaming subscribers target to 1M. I’m not entirely sure how discovery+ benefits them, and free cash flow will likely be lower, now that content spend has ramped up. We’ll see, I continue to hold most of my position. I could see them trading sideways for a while, in the absence of a catalyst.

Thanks for the feedback.
@Northern Reflections on Value - are those options sinking too?
Northern Reflections on Value profile picture
Looks like Discovery is planning to launch discovery+ in Canada, after all -- later this year.


Not clear what exactly would be offered on it in Canada, in the near term, and implications for its specialty cable channels licensed in Canada.
Zetetic always profile picture
@Northern Reflections on Value , Hello. Why would the Shaw family want to remain in control of the company if they don't believe there is a lot of value in the shares? IMO, they haven't sold because they believe the shares are worth more than what they are trading for, but the shares don't advance because market participants don't like their control. So, what is the answer in this case? Again, IMO, a private sale where the buyer acts in shareholder's best interest or an outright purchase by a foreign buyer (if that was ever allowed)? In the meantime, where does the share price go? A much larger dividend might attract buyer.
Northern Reflections on Value profile picture
@Zetetic always A larger dividend is probably not coming up soon on the agenda — once they’re down to 2.5x leverage, the CEO talked about tuck-in acquisitions:

Thank you for the insightful article, absolutely agree with the Author.
Corus Entertainment is one of my favourite Companies on TSX.
I started buying into the Company prior to Rogers acquisition of Shaw announcement, my guess this deal might benefit Corus, although its not entirely clear.
What is a major tailwind is upcoming changes in regulatory environment in Canada, which will greatly benefit Canadian players like Corus.
Essentially, OTT players will be forced to pay up a share of their Gross Revenue to subsidize Canadian content creation. This will help Corus which is obviously a major player in Canadian content creation. On top, a requirement will be for OTTs to acquire more Canadian content, same as applies for linear, traditional TV players. So overall new legislation will be hugely beneficial, the only question is when it will be inacted. I really do not mind waiting, since Corus is rebuilding its Balance Sheet, while waiting for new Legislation.
I adore Companies that pay off Debt and focus on Balance Sheet while waiting for Big Opportunities!
Northern Reflections on Value profile picture
@Investor Max Thanks for reading. Looks like the market took the Rogers/Shaw deal back in March as a reminder that deals can & do happen in this space, though hard to say when, so some of the enthusiasm on Corus faded a bit.

I agree that the protectionism angle for Corus is possibly under-appreciated by investors, relative to, say, U.S. cable providers without such protection.

(Not that this will entirely thwart competition, though, e.g.:


@Northern Reflections on Value thank you for this article! Very helpful in having a more balanced picture!
I simply did not consider that Netflix is already a Canadian content powerhouse and walled garden might crumble over time regardless of government intervention.
When I find a Company, based on intrinsic value discount to market price, I make an effort to find holes in my bullish thesis.
Negatives for Corus that I overlooked is a possible bubbly oversupply of Content coming from the likes of Netflix.
Limited scale of own OTT operations meaning lack of scale!
Real risk for Corus is becoming an equivalent of a local newspaper business, untouchable at any price!
The fact that Shaw family only controls company with close to zero economic interest in the company is a warning sign, they did buy tiny portion at around 2 dollars last year, but nothing major.
When astute strategic shareholder is not buying, its a warning sign.
Northern Reflections on Value profile picture
@Investor Max I just mean to say that Canadian content regulation could help Corus but doesn't necessarily make it a slam dunk, there will always be competition.

Corus still looks inexpensive to me, overall, and they're making progress on debt paydown and other initiatives.
Given the recent transaction of Shaw Communications through Rogers - I'm thinking perhaps the Shaw family is open to divest themselves or at least partially from Corus. The question remains, who will be the buyer of said asset.
Zetetic always profile picture
@Noel_Kreiss , maybe this will catch you up: financialpost.com/...
@Zetetic always the Shaw family and Shaw Communications are different things entirely. The Shaw family still maintain operational control of Corus through their voting shares.
Zetetic always profile picture
@Noel_Kreiss , yes, ok, but I understood your comment as a "divestiture". I don't believe the Shaw family owns shares, but they do control ~85% of the voting rights and others invested in SFG Investments control the other ~15%. I think the question is what are the voting shares worth to them? Historically, because Corus was partially formed for the purpose of spinning off assets that Shaw had to for antitrust reasons, their control would be of use to prevent Corus from competing with Shaw. I don't think the reasoning changes if Rogers now owns Shaw.

That's wrong; the voting shares are the class A shares and there are ~3.5mm of them, all of which SFG Investments owns. They could still be worth something to Rogers, but perhaps they will be forced to sell them? They are clearly worth a lot to Corus class B shareholders.
I have over 9000 shares in Corus 😂 I’m hoping the share price continues to rise. They should be below 3x by year-end and hopefully start purchasing back their shares with the buyback. They had purchased about 4M shares but stopped when COVID hit. The company is seriously under-appreciated and can’t wait to see what comes from them in the years to come. I see the shares hitting $10 CAD in two years maximum.
Northern Reflections on Value profile picture
@Noel_Kreiss I agree that further upside is possible. First we’ll have to pass through $7 CAD on the way to $10 😆.

Thanks for commenting.
Zetetic always profile picture
@Northern Reflections on Value , I enjoyed your article. Two comments:
(1) Your valuation is very conservative
(2) There is no mention of Corus' strength in women and children's tv, Corus Studios, their global licensing initiative, and their content production abilities. Nelvana is a very underappreciated asset.

"Corus creates world-class content that is sold in more than 160 countries across the world.

Nelvana, one of the world’s leading creators, producers and distributors of children’s animated content, and related consumer products, is the cornerstone of the company’s kids content and production business. Globally recognized brands include Babar, Franklin, Max & Ruby, Hardy Boys, Agent Binky: Pets of the Universe and Esme and Roy. Corus’ content business also includes Corus Studios, a globally recognized producer of hit scripted and unscripted content. Series distributed around the world include Island of Bryan, Masters of Flip, $ave My Reno and Scott’s Vacation House Rules.

Also part of the Corus family is Toon Boom, a worldwide leader in digital content and animation creation software, and Kids Can Press, Canada’s leader in children’s publishing.

Corus’ powerful combination of entertainment assets make us an industry leader in Canada and a significant player in the international marketplace. Our success means a stronger Canadian broadcasting industry, a stronger economy and stronger communities across Canada."
Northern Reflections on Value profile picture
@Zetetic always Thanks very much for reading and adding your insights.

I did lean on the conservative side for valuation, in the hopes of not being overly bold, the first time out... Just attaching a median multiple from the comparables would boost the share price target quite a bit. We are coming out of a strange period, with the pandemic, and I expect that there will be time to re-assess, as the year progresses!

The point about strength in women’s and children’s tv is a good one — not everyone in a household has to be a huge fan of the content, as long as at least one person likes it a lot, the chances of them subscribing could be fairly good.
A very inexpensive stock.
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