A top broker has upgraded its forecasts for One Media IP, the group that owns the intellectual property rights to songs by artists such as Take That, Gloria Gaynor and Louis Armstrong, saying it is the last UK listed way for investors to get exposure to music royalties.
Broker Cavendish Capital Markets has upgraded its full year forecasts for digital music rights buyer One Media IP, which today posted a five per cent increase in total revenue to £5.4m in 2023, driven by growth in royalty revenue.
Cavendish said it has raised guidance for adjusted diluted earnings per share by 46 per cent to 0.24p, due to One Media’s efficiency efforts, including its plan to reduce spend on its anti-piracy software TCAT that has been eaten into profit.
It also raised pre-tax and post-tax profit forecasts by 40 per cent to £0.8m and 43 per cent to £0.6m, respectively.
“With music royalty fund Round Hill having been acquired in 2023, and Hipgnosis agreeing to be bought earlier this month, we believe [One Media IP] remains the only UK listed avenue for investors to gain exposure to music royalties, which remain an attractive asset class in our view,” said Cavendish analyst Peter Renton.
“Indeed, the music industry is forecast to continue delivering strong growth in the years ahead (8.6 per cent CAGR over 2023-30E) led by streaming,” he added.
Hipgnosis Songs Fund is currently enveloped in the midst of a takeover bidding battle between two US private equity giants, that will see it bid farewell to London’s increasingly bare public markets.
But Cavendish did slightly lower forecasts for licence revenue, which makes up over 90 per cent of the One Media group total, to around eight per cent growth in 2024.
One Media said operating profit fell from £0.9m to £0.5m in 2023 due to continued investment into its Technical Copyright Analysis Tool (TCAT).
One Media has been focusing on expanding the TCAT service, an anti-piracy software that can detect digital copyright infringement. It is used by two major record labels, the company says.
Shares in the AIM-listed company rose nearly five per cent on Monday, however the stock has tumbled 21 per cent over the past year.
Chief executive Michael Infante said: “The founding principle of deriving profitable income from music copyrights continues to be our prime focus.
“Given our ongoing investment program into TCAT after consultation with advisers and significant shareholders, we have continued to grow our revenues from music rights, delivering a robust set of results despite the challenging conditions presented during 2023.
“The trajectory for the music industry remains positive and music rights as an asset class continue to prove their resilience to wider markets,” he added.
Buckinghamshire-based One Media owns a catalogue of over 240,000 music tracks that it monetises with proven, repeat income streams including over 600 digital stores, such as Apple Music, YouTube, Amazon and Spotify.