TIDMRHM
RNS Number : 0302W
Round Hill Music Royalty Fund Ltd
13 April 2023
13 April 2023
Round Hill Music Royalty Fund Limited
("Round Hill Music" or the "Company")
Second independent valuation report from FTI in line with
Citrin Cooperman's fair value assessment
Round Hill Music (LSE: RHM), which invests in evergreen music
catalogues with proven longevity and revenue streams, is pleased to
announce it has received a second independent valuation report (the
"FTI Report") on its portfolio of music rights from FTI Consulting
Inc ("FTI").
The FTI Report affirms the valuation as at 31 December 2022,
prepared by the Company's independent valuer, Citrin Cooperman. The
FTI Report was commissioned by the Board ahead of the publication
of its full year results for the year ended 31 December 2022, which
are expected to be published later this month, to provide an
additional data point for the market on the fair value of the
Company's investments.
On 6 March 2023 the Company announced that, following receipt of
an independent valuation from Citrin Cooperman (as at 31 December
2022), its Economic Net Asset Value per Ordinary Share was US$1.28
("Economic NAV") and its unaudited IFRS NAV per Ordinary Share was
US$0.93 ("IFRS NAV"). The Economic NAV included a c.US$43 million
increase in the valuation of the Company's portfolio to c.US$603
million (including its equity interest in RH Carlin Holdings LLC
("Carlin interest")).
The FTI Report provides two valuations. One is based on a
transaction using financing with traditional bank debt and one
financed through an asset backed securitisation ("ABS") structure.
The discount rate that results from the Weighted Average Cost of
Capital ("WACC") analysis in the bank debt valuation is 9.25% and
the discount rate that results from the WACC analysis of the ABS
valuation is 8.25%. This compares to a discount rate of 8.5% used
by Citrin Cooperman. FTI applies a low, mid and high range of
valuations. In its mid case, FTI forecasts that overall portfolio
cash flow will grow by 7%, 6% and 5% in 2023, 2024 and 2025,
respectively. The FTI growth rates compare to Citrin Cooperman's
base case assumption of 5% for all income types (excluding a 2%
assumption for 'Other' income) in 2023, 2024 and 2025,
respectively. While FTI assumes a higher discount rate, their
elevated growth assumptions largely offset any negative impact.
Accordingly, FTI's valuation for the traditional bank debt approach
results in an overall variance of just (3)% compared to the Citrin
Cooperman valuation.
The results of the FTI Report are set out below and are based on
the mid case valuation.
FTI Bank Financing Structure Valuation (as at 31 December
2022):
Citrin Cooperman Implied FTI Implied % increase/
Valuation Multiple Multiple (decrease)
Company's portfolio
(excluding Carlin
interest) US$534,939,570 19.4x US$523,490,000 19.0x (2)%
----------------- ---------- --------------- ---------- ------------
Carlin interest US$67,875,045 20.1x US$63,312,040 18.8x (7)%
----------------- ---------- --------------- ---------- ------------
Overall US$602,814,615 US$586,802,040 (3)%
----------------- ---------- --------------- ---------- ------------
Discount Rate
Applied 8.5% 9.25% 8.8%
----------------- ---------- --------------- ---------- ------------
FTI ABS Financing Structure Valuation (as at 31 December
2022):
Citrin Cooperman Implied FTI Implied % increase/
Valuation Multiple Multiple (decrease)
Company' portfolio
(excluding Carlin
interest) US$534,939,570 19.4x US$605,641,000 22.0x 13%
----------------- ---------- --------------- ---------- ------------
Carlin interest US$67,875,045 20.1x US$72,744,400 21.6x 7%
----------------- ---------- --------------- ---------- ------------
Overall US$602,814,615 US$678,385,400 13%
----------------- ---------- --------------- ---------- ------------
Discount Rate
Applied 8.5% 8.25% (3)%
----------------- ---------- --------------- ---------- ------------
FTI's comprehensive valuation methodology is based on a
combination of the following:
-- Analysis of by-track, by-source of income historical performance data;
-- Identification of non-recurring historical royalty collections;
-- Analysis of forecasted revenue for new song releases and sync placements;
-- Analysis of trends among vintage, genre and territory cohorts;
-- Analysis of administrative contract attrition trends,
statutory reversions or other potential loss of income events, as
necessary; and
-- FTI's knowledge of ongoing industry trends, including the
impact of recent legislative and/or regulatory developments.
FTI benchmarks to the observed long-term trends for similar
music publishing and recorded music catalogues, as well as the
broader music industry, and prepares an independent range of
valuation indications.
Round Hill Music also provides additional cross-reference of the
implied multiples to recent transactions using the Shot Tower
M&A multiples database. Shot Tower Capital ("Shot Tower") is an
investment banking boutique that provides advisory and capital
raising services in the media sector with a specific focus on the
music industry, where it has completed more transactions globally
than any other investment banking firm.
Shot Tower maintains a database of music publishing catalogue
transactions and the average multiple of Net Publisher Share
("NPS") paid in 2022 was 19.4x for catalogues of high quality,
iconic copyrights, which are the focus of Round Hill Music's
investment strategy. The 19.4x multiple is the raw average
including all deals in Shot Tower's database for both iconic and
non-iconic copyrights (for every deal greater than US$20 million).
This is in line with the implied multiples derived from the
valuations provided to the Company by both Citrin Cooperman and
FTI.
Commenting on the FTI Report, Josh Gruss, CEO of Round Hill
Music LP, the Company's investment manager, said:
"The independent valuation that we have received from FTI
Consulting supports our strong view that the Round Hill Music
portfolio is significantly undervalued by the market and therefore
offers considerable upside potential, as reflected in the organic
growth that has been delivered since IPO.
"Round Hill Music LP is a pioneer in music rights investment,
having been one of the first to identify the incredible opportunity
that music offers almost 15 years ago. Over that time, we have
built a passionate in-house team of over 70 people with specialist
knowledge and expertise in managing music rights. With its backing,
the Round Hill Music collection has been carefully assembled with
an eye on iconic music with proven playing power, commercial appeal
and the capacity to deliver higher revenue growth through the
multiplicity of opportunities across traditional and expanding
digital landscapes."
FTI Consulting Inc is a publicly traded business advisory firm
with 6,400 employees worldwide that has a deep music
specialisation. It performs valuation services for many of the
music industry players and is commonly engaged in support of music
securitisation transactions to provide independent financial
forecasts and valuations for underlying music catalogue assets. In
addition to the forecast and valuation services, FTI is also asked
to provide additional support services to the underwriter, ratings
agency and/or investors, as required.
FOR FURTHER INFORMATION
Round Hill Music LP
Josh Gruss, Founder and Via Fourth Pillar below
CEO
Steve Clark, COO
Cenkos
Sales:
Justin Zawoda-Martin +44 20 7397 1923
Daniel Balabanoff +44 20 7397 1909
Andrew Worne +44 20 7397 1912
Corporate:
James King +44 20 7397 1913
Will Talkington +44 20 7397 1910
Fourth Pillar (Financial
PR)
Claire Turvey +44 7850 548 198 / claire@thefourthpillar.co.uk
Lynne Best +44 7763 619709 / lynne@thefourthpillar.co.uk
Tomas Nevrkla +44 7963 548865 / tomas@thefourthpillar.co.uk
JTC
Mariana Enevoldsen +44 1481 702 485
About Round Hill Music Royalty Fund Limited
Round Hill Music Royalty Fund invests in high quality, evergreen
music catalogues that have proven longevity and revenue streams,
with the aim of providing investors with an attractive level of
regular and growing income and capital returns, underpinned by the
positive structural drivers of the global music industry.
The portfolio is diversified by income stream and music genre,
with value created through the proactive and careful management and
commercialisation of the repertoire through synchronisation
(placement in films, television series and brand campaigns);
licensing; data cleaning; and distribution (including across
platforms such as Amazon Music, Apple Music, Deezer, and
Spotify).
Its 51 catalogues, totalling over 120,000 songs, include music
performed by artists such as Alice in Chains, Bonnie Tyler, Bruno
Mars, Céline Dion, Lady A, Louis Armstrong, The Offspring, The
Supremes, Whitesnake and Wilson Pickett.
The portfolio of rights includes copyright interests in a
musical composition or song (which can be the writer's share,
publisher's share and/or performance rights), the rights to the
recording of a musical composition or song (the master recording
rights), as well as music rights and assets that meet the Company's
investment strategy and objectives. The Company is a non-cellular
Guernsey company.
A playlist of RHM's top 50 earners can be listened to on Spotify
here . We recommend it served loud.
About Round Hill Music LP (the Investment Manager)
Founded in 2010, Round Hill Music LP is a fully integrated owner
and operator of music copyright properties. It currently manages
150+ catalogues, totalling 330,000+ songs with a combined value of
circa US$1.2 billion.
With over 70 employees located in the major music and
entertainment markets of Nashville, New York, Los Angeles and
London, Round Hill Music LP has an experienced management and
investment team with an established reputation and extensive
expertise in the music and finance industries.
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END
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