Media Stocks – Sorry Bhai! Lucky No-ye
November 29, 2008 by FSJ
BIG names of the M & E industry – high on ‘Pride’ but tepid on ‘Glory’ – did not prove to be oye lucky for their stakeholders, with their September 2008 quarterly results.
Investors now look forward to these Yuvvraajs of the media & entertainment sector turning in to The Hunting Party with an Eagle Eye for the time-tested basics of profitable show business: like prudent cost-control, robust story-screenplay-direction, tight-budgeted but effective marketing et al so that their results may improve in the ensuing quarters. Some results and recommendations (post-results) are detailed below:
Accumulate Zee Entertainment (ZEEL): KR Choksey (current price Rs. 109):
ZEEL posted an 83.54% increase in consolidated net proft at Rs. 178.15 crore for the second quarter ended September 30, 2008, against the Rs. 97.06 crore in the corresponding quarter of the previous year. “Zee Next has made losses of Rs. 8.2 crore in this quarter. The company is formulating a revised strategy for the channel and has therefore bought the channel under maintenance mode. Management has maintained its guideline of top-line to grow by 30% and bottom-line by 25-30% (despite losses from Zee Next) in FY09. ZEEL would be launching 2-3 new programs in the coming months to compete with new channels, especially Colors, which has become a direct challenge to ZEEL’s no. 2 spot in GEC. At CMP of Rs. 145, the stock is trading at 11.6x TTM EPS of Rs. 12.5. We recommend the investors to ACCUMULATE the stock at these levels.”
Buy TV Today (TVTN), target of Rs. 94: Angel Broking (current price Rs. 53):
Angel Broking is bullish on TV Today Network and has recommended a buy rating on the stock with target price of Rs. 94, in its October 31, 2008 report. “We believe improved viewership share of Headlines Today and its sustenance, merger of Radio Today, flow of subscription revenues and new channel launches would be key drivers for TVTN’s stock performance in the ensuing quarters. Given strong brand equity of Aaj Tak, steady Earnings CAGR of 18.2% over FY2008-10E, improving Return Ratios and high cash per share of Rs. 25, we believe the stock is a true value play at current levels. We maintain a Buy on the stock, with a revised target price of Rs. 94 (Rs. 117) at lower P/E multiple of 9x FY2010E Earnings to discount the sharp fall in markets.”
Buy Entertainment Network (ENIL), target of Rs. 293: Nirmal Bang (current price Rs. 109):
“ENIL declared its Q2FY09 results which were in line with our expectations on the revenue front. The company reported revenues of Rs. 109.57 crore as against Rs. 86.3 crore in Q2FY08 i.e. 27% rise YoY basis and Rs. 107 crore in Q1FY09, a 2.4% rise on QoQ basis. The company reported net loss of Rs. 18.2 crore in Q2FY09 against a loss of Rs. 17.2 crore in Q2FY08 and Rs. 8 crore loss in Q1FY09. At the current price of Rs. 150 per share, ENIL is currently available at 24.5x FY10E and 12.0x FY11E. However, the high PE multiple in the initial years is justified, looking to the huge capex plans of the company and also as the company is in the high growth phase. We expect the company to earn a RONW (Return on Net Worth) of 11% in FY10E and 19% in FY11E. At Rs. 150 per share the stock is trading at a discount of 95.6% from our intrinsic price of Rs. 293.5 per share. We reiterate our BUY rating on the stock with a revised price target of Rs. 293.5 per share with a longterm view.”
Pyramid Saimira Theatre Limited (PSTL): The movie exhibition arm of the Pyramid Saimira Group has registered a turnover of Rs. 2.52 billion for the quarter ended September 30, 2008, as compared to a turnover of Rs. 1.44 billion for the same period last year, thereby registering a 75% growth in turnover. The net profit for the quarter stood at Rs. 87 million, as compared to a net profit of Rs. 151 million for the corresponding period last year. The margins were under pressure due to increase in all input costs. The company has announced that it will undertake restoration of 250 screens across South India with a budget outlay of Rs. 2 billion over a period of 18 months. PSTL currently manages 4.69 lakh seats per show and during this quarter, PSTL recorded close to 628.94 lakh footfalls. The average capacity utilisation has been 35.9%.
UTV Software Communications: It has posted an 86% rise in net profit for the second quarter ended September 30, 2008, at Rs. 57.9 crore when compared with Rs. 26.7 crore in the corresponding quarter of the previous year. The company’s total operating revenues saw a 138% rise at Rs. 170.8 crore for the second quarter ended September 30, 2008, from Rs. 71.9 crore in the year-ago period. “UTV is quite close to achieving its goal of becoming a true 360 degree media company with its focus on five key verticals of Television, Movies, Interactive, New Media and Broadcasting,” says the management about UTV’s future outlook. “Over the last couple of years, UTV has built a robust and scalable business model. Walt Disney, upping its stake from its existing 14% to 32%, is itself a strong benchmark in support of our strategy and robust business model. The Company aims to achieve a leadership position in all these verticals in the times to come.”
Adlabs Films: Consolidated net sales went up to Rs. 252.1 crore from Rs. 228.97 crore. It has reported a net loss of Rs. 20.8 crore versus a net profit of Rs. 3.4 crore (QoQ). The Cinema division grew by 119% to Rs. 89 crore. Film processing and services division recorded a 75% increase to Rs. 38 crore. Film production and distribution business contributed Rs. 70 crore. Television content business has increased significantly to Rs. 14 crore from Rs. 1 crore last year.
On a sequential trailing quarter basis (April to June 08 quarter), turnover and operating EBIDTA excluding radio, has grown by 21% and 30% respectively.
Anil Arjun, CEO, Big Films Ltd., commented on the performance thus: “All business segments have recorded strong growth. Film production and distribution business has had successful releases in Singh Is Kinng and Rock On!!. Our exhibition chain, Big Cinemas, has crossed a milestone of 400 screens worldwide. Film Processing and Services has gained significantly in the areas of DI, Restoration and Equipment Rentals.” Big has decided to revive the proposal for the demerger of the radio business of the company.
Stock market overview:
If stock markets were falling down in these uncertain times, so were precious human lives in Bombay. Our condolences to the bereaved families of the hapless victims of the most inhuman terrorist attack in India on November 26, 27 and 28.
- J N Mamtora
mamtorajn@yahoo.co.in
(The writer is a B. Tech from IIT, and MBA from IIM, Ahmedabad.)
Issue dated Nov 30 – Dec 6, 2008
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