This is one exciting stock

Unlike most other film/video production companies, CCN are not exposed to films that flop, that was my main concern.

Basically they have two divisions, The Film Consortium and the Works.

The Film Consortium (TFC) have investors that put up cash for investment in films and TFC advise investors what films they should invest in and find investment for films. This is 'green lighting' or giving the films the go ahead. TFC make money doing this. It isn't TFC whose money goes into the films so if a film tanks it isn't their worry, they only lose a bit of cred I guess and give an investor or two the hump.

The Works (TW) sell the licenses to areas for Films, DVD, VHS and TV for the investor/fim makers. This will be a up front guaranteed fee that they sell to the licensee - the licensee then sells the film thoughout his given area. Each film license is sold with say a license fee of 'at least' 100K for example, depending on how well the film sells then further fees are paid. These are called overages and can boost how much CCN get big time. I think this is why CCN are excited about My Summer of Love, as it looks like there will be lots of overages on this film, and there are overages on other films coming in.

The third revenue stream is The Works selling licenses for third party films they have had nothing to do with organising the funding of - sales agents basically and the more well known The Works gets, the more of these they expect to come in.

For the year gone they have organised 1.2m of funding towards 15 films. That doesn't mean each film is only 80K to make, it means they have organised part of the funding for a number of films but the films may have other backers. The year ahead will see 7m of funding organised through Surefire which is going toward that 40m of films in production they mention in the results. They expect to have these canned by Christmas in order to get the tax breaks before April 1 (100% tax allowance in the first year on films below 15m budget).

Lottery funding has finished as far as being one of 3 main lottery recipients for funding goes but they can apply on a per film basis to get lottery funding. In it's place is Surefire. Surefire is a dedicated business for finding film investors and they are pumping in lots of money (that 7m for starters this year) so the investment to go into films should be much greater. Two directors that have been running Surefire have become non execs on the CCN board.

They also have a new major shareholder Fandango, who bought the 29.9% stake held by former Civilian founder Richard Thompson. These are Italian film makers and are set to put 3 films the way of CCN each year.

The FD was saying that they have only really started to get this business focussed as they have only just disposed of the last remains of the old CCN business which was a canned meat business so it's in its infancy in a way.

There is no reason I can see why this business should trade on a PE as low as 8. They have got rid of two thirds of the staff and boosted gross margins massively from 40 odd per cent to 92%. They don't get hit when a film flops, the worst that happens is films get delayed and so earning might slip back, but they don't disappear with big chunks of investment down a black hole.

Growth here could be huge, the 2.2p forecast for this year could well be smashed big time. This is a completely transformed business that is just getting up and running. Fandango have 29.9%, the two directors from Surefire have 4% and they are all set to synergise with each other over the coming years.

I can't begin to think what the growth could be like here but at a guess it is going to be massive. Overages create much, much higher earnings. If TFC organise great films for investment and then find the licensees and the films sell (as seems to be happening) then they are going to do fantastically imo.

These don't have the risk associated with the likes of Winchester Entertainments and so the PE should be much higher imo.

2.2p eps looks like being beaten easily imo. I'm sure these will re-rate to a PE of 12-15 and will do at least 2.5p eps this year which could mean 37p a share by the financial year end. They also will have 2m in cash come year end so one third the market cap is cash - that has to be worth another few pence on the share price.

If they beat 2.5p eps this year and do 3p as I suspect then come the financial year end they will be on an historic PE of 12, probably a forward PE of 8 (if the share price is 37p) and 2m in the bank with an absolute ton of films in production for their clients. If that were the case I reckon that would see the share price at 50p+ in 12 months time.

They seem very confident about the next twelve months and films in production are growing rapidly and in value size.

There's one last sweet spot - there is always the chance they hit on a Harry Potter the more films they get involved with. If they do then earning go ballistic.

They have 6.5m losses on the P&L account so no tax to pay on earnings for some time. They are also able to extract decent grants from the Lottery Fund on a one off basis and get grants from the British Film Council too.

Worth a look imo.

CR

Get the feeling this must be in the process of being tipped somewhere.

capa

quick search - http://www.thisismoney.com/20041004/nm83182.html 5th Oct
www.ft.com 4th Oct - so should keep rising

http://www.thisismoney.com/20041004/nm83182.html

This is really exciting.

looks that way, slight dip this morning, but should bounce back

slight dip ? and there was me thinking it was up



capa

capa - yes - parallax view(huh?) I was looking at chart from early 8am this morning (22-21)hence slight dip but agree up from yesterday though, seems to have steadied now, lots of buys coming through, so looks like it will be up
m100

only joking m100.

I feel it will be up today also, but 30p is where my sights are set :-)

capa

still looks undervalued based on the interim results and expected deals/revenues. Plus we're nearing the xmas period which is usually big on films. have only just started looking at this one myself, but it should have much further to go.

skids

capa - ok! sorry toooo early in morning for me! right direction again now
(see PCI has imminent drilling also - good news there)

m100, well you were correct, back up again.

You can get 20.85p for them now if anyone is interested in selling, or 30p in at least a couple of months.

capa

some solid buying coming in now

capa

Blimey this reminds me of ASC in the early days.

capa

I should have bought more - ah well hindsight is a wonderful thing

m100 - LOL. I have been so lucky here, got in at 10p and topped up last week
at 16p. Just wish I had bought more, thats hindsight for you.

capa

well I've had worse days !

capa

seems to be a bit of profit taking this morning, RNS from CFL out this a.m which implies things are okay on the back of My Summer Of Love.

capa

may have been a bit premature but got some more today at 22.24p I now hold at an average of 15.35p

capa

Retrace on thin volumes & can pick them up cheaper,18.5p/19p.

Institutional buying, these are getting noticed.

capa