Sensex

Sunday, December 30, 2007

$$ DreamGains !! $$ Subex - Batlivala & Karani - Buy Given @ 526 CMP 330


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$$ DreamGains !! $$ Subex : DataMonitor : December 11, 2007


__,_._,___

$$ DreamGains !! $$ Wednesday Telefolio : Entertainment Network (India)

Entertainment Network (India)

Three high growth businesses under its belt

The company’s growth story is set to explode once its FM radio, out-of-home advertising and event management businesses achieve critical mass over the next one year

Buy

Entertainment Network (India)

BSE Code

532700

NSE Code

ENIL

Bloomberg

ENIL@IN

Reuter

ENIL.BO

52-week High/Low

Rs 700/250

Current Price

Rs 642 (as on 26/12/2007)

Entertainment Network (India) (ENIL) has three high growth businesses under its fold: FM radio, out-of-home advertising and event management.

Radio business set to reap the rewards

Aided by corporate backing of the Times Group, ENIL has carved out strong brand equity for Radio Mirchi. With Radio Mirchi’s brand equity and footprint in key markets, ENIL is the best prospect in the FM radio space. Out of overall Indian advertising spends as a as a % of GDP of 0.34%, Radio accounts for only 2.6% of the total ad spend in India as against 8.5% globally and 11% in the US.

Possibility of high penetration, low ad avoidance, high listener loyalty (niche positioning) and local reach make radio the most cost-effective advertising medium globally. Besides, radio also finds favour among advertisers on account of its 'multiplier effect'.

Entertainment Network (India) until recently focused on 4 Metros and a few other cities.

With more liberal licensing regime and success seen in metros, the company started invading Tier 2 and Tier 3 cities. From 7 cities in 2006, the company has presence in 27 cities as of Sep’07, with 5 more stations to be launched by Dec’07. The company adopts a very unique city centric model, which covers the main city (business place or capital city) within a particular state. This leads to generation of business on a scalable basis. This city centric model is very useful for ENIL since nearly 70% of its ad clients are national advertisers having presence across India.

Normally it takes around 12-18 months time frame to break even a radio station and one time cost of around Rs 1.5 crore. Since 15 new stations were added in the H1 FY’08, the one time cost and other variable cost without corresponding revenues lead the margins to suffer. Nevertheless, the company has received very encouraging response in new cities and is ahead of its internal forecast for breakeven for new radio stations.

In existing stations, the company was seeing some pressure in margins because of the competition particularly in the metro stations where many new radio stations are available now. Because there were many new entrants, the company was not able to increase the ad rates. Even then Radio Mirchi has largest listenership and has outperformed the other existing and new players.

Initially the company held back increase in rate hike, but after having established a strong foothold in listenership even in a new competitive environment and with new entrants also stabilizing their pricing, the company has gradually increased the rates, the full benefits of it will start reflecting from the second half of the current year.

The company had hiked the advertisement rates by 15% in the month of Sep’07 across all the radio stations. The company has market share of about 65% for new radio stations and has increased its market share in existing radio stations by 1% to 50% on q.o.q basis.

The ramp up of the new stations along with debottlenecking of growth in existing stations, is happening very fast which gives a strong visibility of earnings growth for ENIL going forward.

During H1 FY’08, the company reported radio revenues of Rs 94 crore, up by 25% on y.o.y basis. Normally for any radio business, the revenues are divided into 60:40 basis on H2:H1 period as second half is the busy season. Moreover with increase in ad rates, early break even of newly launched stations, the H2 FY’08 will be much better both in revenues and in margin compared to first half. Also all the stations will be fully operational in FY’09 and hence we expect the company to post substantial growth in volume (advertisements seconds sold) along with good rate hkes, leading to strong growth which will continue in FY’10 also.

Out of Home Advertising business has a tremendous potential to grow

Out of Home (OOH) market in India is estimated to be around Rs 6-7 billion and accounts for approximately 6% of total ad spends. OOH business is a typically capital intensive business, where major portion of the cost is in the form of license fees for advertising rights in a particular location. ENIL has acquired marketing rights for attractive properties like Delhi and Mumbai airports, metro rails, bus queue shelters, etc. The roll out of sites is complete at Delhi Airport whereas Mumbai Airport roll out will be complete within few months.

In OOH, the company has extended its contract for 1400 bus shelters in Mumbai post December 2008. The company also has access to 200 display sites at Delhi-Noida flyway, 839 sites at 13 Delhi metro stations, 67 billboards in Kolkata and 8 hoardings in Pune. It has also won the rights for Kolkata Metro trains. At the 2 Airports the company would have 300 display options and 2 LED screens at Mumbai Airport and 233 display options at Delhi Airport. Since the business is in its inception, the initial loss is very natural for the company. For H1 FY’08, the company reported revenue of Rs 48 crore and loss of Rs 17.9 crore at EBITA levels.

The company has already tied up with international players for out of home business and appointed a separate head for the focussed growth of this business. The company is firming up the plans to make some strategic decisions for this segment. It expects to ramp up the capacity utilization for this division and is very optimistic about its prospects going forward.

Event Management business is moving up the value chain

Times Innovative Media (TIM), transferred the event management business which operates under the brand name 360Degrees to a new company, Alternate Brand Solutions Limited (ABS), which is a wholly owned subsidiary of ENIL. The company has finalized a 3-year roll out plan for event management business.

This business so far focused on live events, where last year it conducted 744 events, which include right from conducting promo of products to big events like Femina Miss India. The company is moving up the value chain and is going for acquiring Intellectual property rights (IPR). Some of the IPRs, which the company has, are Mr India, Femina Miss India, Miss Teen etc. Typically, more than 65% of revenue in event management business is generated in H2. So although the company reported revenue of Rs 17.6 crore and loss of Rs3.6 crore at EBITA level for H1 FY’08, it will report profits in later period of this year and will remain on high growth track.

Financials

For the quarter ended September’07, the company reported net sales of Rs 53.16 crore, up by 29%. The OPM was down by 700 basis points, which lead the OP down by 11% to Rs 8.18 crore. The new stations were responsible for nearly 800 basis points drop in margin as there were only expenses without any significant revenues from these new stations. The amortization and depreciation cost increased by 58%, as the company has to amortize the license fees within 10 years of launch from the date of operationalisation of radio stations. The company is under MAT and will continue to enjoy the privilege till 2009. The PAT stood at Rs 0.64 crore, down by 87%. On half yearly basis, the revenues and PAT stood at Rs 94 crore and Rs 1.05 crore respectively.

Valuation

Considering the nature of business, one has to take into consideration the long-term visibility in earnings and scalability going forward. One should also bear in mind that while radio business will be highly profitable and bring sharp growth as well, OOH and event management will fetch substantial valuation even if profits are low as internationally these businesses enjoy highest valuations compared to traditional media due to sustained higher growth potential. Faster infrastructure development and higher product launches and mall-culture will drive OOH and event management at a fast rate in India as well.

ENIL’s standalone results projected in the Financials table are only for FM radio business. Within one year, market will discount FY 2010 revenues and earnings for this company and based on that radio business itself will be worth Rs 500 per share (25 times FY10 EPS or 5 times FY10 revenues). OOH business will be as large as FM radio business in FY 10, though profitability will be lower. OOH business will however get at least the same valuation as FM radio business (Rs 500 per ENIL share which is 5 times expected OOH revenues of around Rs 500 crore in FY10) due to higher growth potential in line with international norms. The total comes to Rs 1000 per share without considering event management business, which will be relatively smaller but will be enough to spice up valuation further.

Besides revenue and earnings growth, other triggers for the scrip will be listing of BIG FM by Reliance ADAG and possible strategic placement for OOH and event management businesses, bringing out the hidden value in the open.

Entertainment Network (India): Financials

 

 

0403(12)

0503(12)

0603 (12)

0703 (12)

0803(12P)

0903(12P)

1003(12P)

Sales

55.6

74.94

117.41

167.2

235.00

352.50

475.88

OPM(%)

#

#

31.3

26.6

25.2

30.0

35.0

OP

-24.5

-13.54

36.79

44.43

59.92

105.75

166.56

Other Income

1.35

1.28

1.35

3.32

2.08

2.00

2.00

PBDIT

-23.15

-12.26

38.14

47.75

62.00

107.75

168.56

Interest

0.1

0.29

2.59

2.03

3.53

5.00

5.50

PBDT

-23.25

-12.55

35.55

45.72

58.47

102.75

163.06

Depreciation

6.05

5.34

12.33

17.94

28.00

30.00

30.00

PBT before EO

-29.29

-17.89

23.21

27.78

32.97

72.75

133.06

EO

0.03

0.03

-9.81

0

0.00

0.00

0.00

PBT after EO

-29.32

-17.92

33.02

27.78

32.97

72.75

133.06

Tax

0.01

0.01

3.55

0

3.17

7.28

37.26

PAT

-29.33

-17.93

29.47

29.08

29.81

65.48

95.80

EPS

-

-

4.1

6.1

6.3

13.7

20.1

Current equity of Rs 47.65 crore.
Face Value: Rs 10
Figures in Rs crore, (P) Projections 
Source: Capitaline Corporate Database 

 

ENIL: Standalone Results

 

 

0709 (3)

0609 (3)

Var. (%)

0709 (6)

0609 (6)

Var. (%)

0703 (12)

0603 (12)

Var (%)

Net Sales

53.16

41.05

29

94.00

75.23

25

167.2

117.41

42

OPM (%)

15.4

22.4

 

15.7

19.3

 

26.6

31.3

 

OP

8.18

9.21

-11

14.8

14.51

2

44.43

36.79

21

Other Income

0.04

0.23

-83

0.08

0.64

-87

3.32

1.35

146

PBIDT

8.22

9.45

-13

14.88

15.15

-2

47.75

38.14

25

Interest (net)

0.89

0

PL

1.36

-0.14

PL

2.03

2.59

-22

PBDT

7.33

9.45

-22

13.52

15.28

-12

45.72

35.55

29

Depreciation Amortization

7.06

4.46

58

12.5

8.56

46

17.94

12.33

45

PBT before EO

0.27

4.99

-95

1.02

6.72

-85

27.78

23.21

20

EO

0

0

 

0

0

 

0

-9.81

 

PBT after EO

0.27

4.99

-95

1.02

6.72

-85

27.78

33.02

-16

Tax

-0.37

0.06

LP

-0.03

0.48

-105

0

3.55

LP

PAT

0.64

4.93

-87

1.05

6.24

-83

29.08

29.47

-1

EPS (Rs.)

#

#

 

#

#

 

6.1

4.1

 

# EPS is not calculated due to seasonality of business
Current equity of Rs 47.65 crore.
Face Value: Rs 10
Figures in crore,
Source: Capitaline corporate database

 

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$$ DreamGains !! $$ Wednesday Telefolio : Entertainment Network (India)

Entertainment Network (India)

Three high growth businesses under its belt

The company’s growth story is set to explode once its FM radio, out-of-home advertising and event management businesses achieve critical mass over the next one year

Buy

Entertainment Network (India)

BSE Code

532700

NSE Code

ENIL

Bloomberg

ENIL@IN

Reuter

ENIL.BO

52-week High/Low

Rs 700/250

Current Price

Rs 642 (as on 26/12/2007)

Entertainment Network (India) (ENIL) has three high growth businesses under its fold: FM radio, out-of-home advertising and event management.

Radio business set to reap the rewards

Aided by corporate backing of the Times Group, ENIL has carved out strong brand equity for Radio Mirchi. With Radio Mirchi’s brand equity and footprint in key markets, ENIL is the best prospect in the FM radio space. Out of overall Indian advertising spends as a as a % of GDP of 0.34%, Radio accounts for only 2.6% of the total ad spend in India as against 8.5% globally and 11% in the US.

Possibility of high penetration, low ad avoidance, high listener loyalty (niche positioning) and local reach make radio the most cost-effective advertising medium globally. Besides, radio also finds favour among advertisers on account of its 'multiplier effect'.

Entertainment Network (India) until recently focused on 4 Metros and a few other cities.

With more liberal licensing regime and success seen in metros, the company started invading Tier 2 and Tier 3 cities. From 7 cities in 2006, the company has presence in 27 cities as of Sep’07, with 5 more stations to be launched by Dec’07. The company adopts a very unique city centric model, which covers the main city (business place or capital city) within a particular state. This leads to generation of business on a scalable basis. This city centric model is very useful for ENIL since nearly 70% of its ad clients are national advertisers having presence across India.

Normally it takes around 12-18 months time frame to break even a radio station and one time cost of around Rs 1.5 crore. Since 15 new stations were added in the H1 FY’08, the one time cost and other variable cost without corresponding revenues lead the margins to suffer. Nevertheless, the company has received very encouraging response in new cities and is ahead of its internal forecast for breakeven for new radio stations.

In existing stations, the company was seeing some pressure in margins because of the competition particularly in the metro stations where many new radio stations are available now. Because there were many new entrants, the company was not able to increase the ad rates. Even then Radio Mirchi has largest listenership and has outperformed the other existing and new players.

Initially the company held back increase in rate hike, but after having established a strong foothold in listenership even in a new competitive environment and with new entrants also stabilizing their pricing, the company has gradually increased the rates, the full benefits of it will start reflecting from the second half of the current year.

The company had hiked the advertisement rates by 15% in the month of Sep’07 across all the radio stations. The company has market share of about 65% for new radio stations and has increased its market share in existing radio stations by 1% to 50% on q.o.q basis.

The ramp up of the new stations along with debottlenecking of growth in existing stations, is happening very fast which gives a strong visibility of earnings growth for ENIL going forward.

During H1 FY’08, the company reported radio revenues of Rs 94 crore, up by 25% on y.o.y basis. Normally for any radio business, the revenues are divided into 60:40 basis on H2:H1 period as second half is the busy season. Moreover with increase in ad rates, early break even of newly launched stations, the H2 FY’08 will be much better both in revenues and in margin compared to first half. Also all the stations will be fully operational in FY’09 and hence we expect the company to post substantial growth in volume (advertisements seconds sold) along with good rate hkes, leading to strong growth which will continue in FY’10 also.

Out of Home Advertising business has a tremendous potential to grow

Out of Home (OOH) market in India is estimated to be around Rs 6-7 billion and accounts for approximately 6% of total ad spends. OOH business is a typically capital intensive business, where major portion of the cost is in the form of license fees for advertising rights in a particular location. ENIL has acquired marketing rights for attractive properties like Delhi and Mumbai airports, metro rails, bus queue shelters, etc. The roll out of sites is complete at Delhi Airport whereas Mumbai Airport roll out will be complete within few months.

In OOH, the company has extended its contract for 1400 bus shelters in Mumbai post December 2008. The company also has access to 200 display sites at Delhi-Noida flyway, 839 sites at 13 Delhi metro stations, 67 billboards in Kolkata and 8 hoardings in Pune. It has also won the rights for Kolkata Metro trains. At the 2 Airports the company would have 300 display options and 2 LED screens at Mumbai Airport and 233 display options at Delhi Airport. Since the business is in its inception, the initial loss is very natural for the company. For H1 FY’08, the company reported revenue of Rs 48 crore and loss of Rs 17.9 crore at EBITA levels.

The company has already tied up with international players for out of home business and appointed a separate head for the focussed growth of this business. The company is firming up the plans to make some strategic decisions for this segment. It expects to ramp up the capacity utilization for this division and is very optimistic about its prospects going forward.

Event Management business is moving up the value chain

Times Innovative Media (TIM), transferred the event management business which operates under the brand name 360Degrees to a new company, Alternate Brand Solutions Limited (ABS), which is a wholly owned subsidiary of ENIL. The company has finalized a 3-year roll out plan for event management business.

This business so far focused on live events, where last year it conducted 744 events, which include right from conducting promo of products to big events like Femina Miss India. The company is moving up the value chain and is going for acquiring Intellectual property rights (IPR). Some of the IPRs, which the company has, are Mr India, Femina Miss India, Miss Teen etc. Typically, more than 65% of revenue in event management business is generated in H2. So although the company reported revenue of Rs 17.6 crore and loss of Rs3.6 crore at EBITA level for H1 FY’08, it will report profits in later period of this year and will remain on high growth track.

Financials

For the quarter ended September’07, the company reported net sales of Rs 53.16 crore, up by 29%. The OPM was down by 700 basis points, which lead the OP down by 11% to Rs 8.18 crore. The new stations were responsible for nearly 800 basis points drop in margin as there were only expenses without any significant revenues from these new stations. The amortization and depreciation cost increased by 58%, as the company has to amortize the license fees within 10 years of launch from the date of operationalisation of radio stations. The company is under MAT and will continue to enjoy the privilege till 2009. The PAT stood at Rs 0.64 crore, down by 87%. On half yearly basis, the revenues and PAT stood at Rs 94 crore and Rs 1.05 crore respectively.

Valuation

Considering the nature of business, one has to take into consideration the long-term visibility in earnings and scalability going forward. One should also bear in mind that while radio business will be highly profitable and bring sharp growth as well, OOH and event management will fetch substantial valuation even if profits are low as internationally these businesses enjoy highest valuations compared to traditional media due to sustained higher growth potential. Faster infrastructure development and higher product launches and mall-culture will drive OOH and event management at a fast rate in India as well.

ENIL’s standalone results projected in the Financials table are only for FM radio business. Within one year, market will discount FY 2010 revenues and earnings for this company and based on that radio business itself will be worth Rs 500 per share (25 times FY10 EPS or 5 times FY10 revenues). OOH business will be as large as FM radio business in FY 10, though profitability will be lower. OOH business will however get at least the same valuation as FM radio business (Rs 500 per ENIL share which is 5 times expected OOH revenues of around Rs 500 crore in FY10) due to higher growth potential in line with international norms. The total comes to Rs 1000 per share without considering event management business, which will be relatively smaller but will be enough to spice up valuation further.

Besides revenue and earnings growth, other triggers for the scrip will be listing of BIG FM by Reliance ADAG and possible strategic placement for OOH and event management businesses, bringing out the hidden value in the open.

Entertainment Network (India): Financials

 

 

0403(12)

0503(12)

0603 (12)

0703 (12)

0803(12P)

0903(12P)

1003(12P)

Sales

55.6

74.94

117.41

167.2

235.00

352.50

475.88

OPM(%)

#

#

31.3

26.6

25.2

30.0

35.0

OP

-24.5

-13.54

36.79

44.43

59.92

105.75

166.56

Other Income

1.35

1.28

1.35

3.32

2.08

2.00

2.00

PBDIT

-23.15

-12.26

38.14

47.75

62.00

107.75

168.56

Interest

0.1

0.29

2.59

2.03

3.53

5.00

5.50

PBDT

-23.25

-12.55

35.55

45.72

58.47

102.75

163.06

Depreciation

6.05

5.34

12.33

17.94

28.00

30.00

30.00

PBT before EO

-29.29

-17.89

23.21

27.78

32.97

72.75

133.06

EO

0.03

0.03

-9.81

0

0.00

0.00

0.00

PBT after EO

-29.32

-17.92

33.02

27.78

32.97

72.75

133.06

Tax

0.01

0.01

3.55

0

3.17

7.28

37.26

PAT

-29.33

-17.93

29.47

29.08

29.81

65.48

95.80

EPS

-

-

4.1

6.1

6.3

13.7

20.1

Current equity of Rs 47.65 crore.
Face Value: Rs 10
Figures in Rs crore, (P) Projections 
Source: Capitaline Corporate Database 

 

ENIL: Standalone Results

 

 

0709 (3)

0609 (3)

Var. (%)

0709 (6)

0609 (6)

Var. (%)

0703 (12)

0603 (12)

Var (%)

Net Sales

53.16

41.05

29

94.00

75.23

25

167.2

117.41

42

OPM (%)

15.4

22.4

 

15.7

19.3

 

26.6

31.3

 

OP

8.18

9.21

-11

14.8

14.51

2

44.43

36.79

21

Other Income

0.04

0.23

-83

0.08

0.64

-87

3.32

1.35

146

PBIDT

8.22

9.45

-13

14.88

15.15

-2

47.75

38.14

25

Interest (net)

0.89

0

PL

1.36

-0.14

PL

2.03

2.59

-22

PBDT

7.33

9.45

-22

13.52

15.28

-12

45.72

35.55

29

Depreciation Amortization

7.06

4.46

58

12.5

8.56

46

17.94

12.33

45

PBT before EO

0.27

4.99

-95

1.02

6.72

-85

27.78

23.21

20

EO

0

0

 

0

0

 

0

-9.81

 

PBT after EO

0.27

4.99

-95

1.02

6.72

-85

27.78

33.02

-16

Tax

-0.37

0.06

LP

-0.03

0.48

-105

0

3.55

LP

PAT

0.64

4.93

-87

1.05

6.24

-83

29.08

29.47

-1

EPS (Rs.)

#

#

 

#

#

 

6.1

4.1

 

# EPS is not calculated due to seasonality of business
Current equity of Rs 47.65 crore.
Face Value: Rs 10
Figures in crore,
Source: Capitaline corporate database

 

__._,_.___
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$$ DreamGains !! $$ Friday Telefolio : Zee Entertainment

 

Zee Entertainment Enterprises

Zooming ahead

In a favourable economic environment, the company would be able to profitably capitalise on its march towards No. 1 slot in the general entertainment space

Buy

Zee Entertainment Enterprises

BSE Code

505537

NSE Code

ZEEL

Bloomberg

Not listed

Reuter

ZEE.BO

52-week High/Low

Rs 373 / Rs 210

Current Price

Rs 315 (as on 28th December 2007)

Today, Zee Entertainment Enterprises (ZEEL) is India’s leading television broadcasting company with a global presence, close to 500 million viewers through Zee TV, Zee Cinema, Zee Sports, Zee Music and Zee English.

Zee is the largest producer and aggregator of Hindi programming in the world, with more than 30,000 hours of original programming in the library. It is one of the most popular entertainment brands in India. It was ranked as the ninth most popular brand within a decade of its launch. It also has one of the largest Indian multiple distribution platform reach with an estimated reach of 500 million viewers in over 120 countries globally including USA, Canada, Europe, Africa, the Middle East, South East Asia, Australia and New Zealand

Fast forward towards No 1

The viewer ship share of Zee TV, the flagship general entertainment channel, grew from 16% to 26% in 2006-07. The channel share has risen to an all time high in lucrative prime time band. Zee TV was the only channel that has grown by such magnitude in its genre. This has helped Zee TV to narrow the gap considerably with the No.1 Star, which was six times ahead of Zee TV in terms of TRPs last year. This has been largely on account of exclusive contents that were launched in the channel during 2006-07.

As per reports given by TAM Media Research, Zee's relative channel share stands at 28.5% onlty slightly less than the 30.7% that Star Plus has of the entire channel pie in the period between August 26, 2007 and September 1, 2007. The Lack of programming innovation on Star's front has worked to the benefit of only Zee, in the recent past. It now has around 20 programs in the Top 50, which is growing by 3-5 programs every quarter.

Solid financial show

For the quarter ended September 2007, consolidated operating revenues grew 14% at Rs 398.60 crore with advertising revenues up 28% at Rs 219.50 crore, subscription revenues up 10% at Rs 162.46 crore and other sales & services was down 46% at Rs 16.64 crore due to ZILS ceasing to be subsidiary of the company. OPM skyrocketed to 33.1% against 6.2% on the back of hike in billing rates. As a % of sales, programming & operating costs decreased 2710 bps at 41.6% on account of lower sports programming. However, staff costs increased 160 bps at 8.5% and selling & other expenses decreased 140 bps at 16.8% as a % of sales. Thus operating profit zoomed 508% to Rs 132.08 crore.

Other income increased 48% at Rs 22.47 crore. Interest cost for the quarter was up 148% at Rs 8.50 and depreciation charge for the quarter increased 9% at Rs 5.54 crore. Thus PBT expanded 395% at Rs 140.51 crore. Provision for taxation increased 490% at Rs 43.45 crore, which took PAT up by 362% at Rs 97.30 crore. Minority interest for the quarter was Rs 4.56 crore against credit of Rs 1.22 crore. Thus net profit for the quarter stood at Rs 92.50 crore up 316%.

Upbeat future

Subhash Chandra, Chairman, says, "We had a commendable second quarter performance, with operating profit growth of 508% over corresponding quarter of the last fiscal year, this substantial growth has been led by robust increase in advertising revenues. Over the years, we have put in sincere efforts towards content initiatives, which are now being reflected in our results. Our flagship channel Zee TV gained leadership in the last few weeks of this quarter and the support of other channel’s rising GRPs will provide the requisite momentum for growth in advertising revenues. The Indian television industry is going through a very interesting phase of transformation from analogue to digital, which has positive implication for all the players in the media value chain. We are confident that the Zee Entertainment would be a big beneficiary of this change through unlocking of its revenue potential."

Punit Goenka, Whole Time Director, commented "This quarter our flagship channel - Zee TV has been successful in not only bridging the gap with the genre leader substantially, but also has surpassed the leader in prime time. Zee TV, during the quarter, averaged a channel share of 30% in all day’s viewership ratings, up from 25% in the previous quarter. The channel’s rating has grown across all time bands and has averaged 310 gross rating points (GRPs) in the recent weeks up from average 234 GRPs in the previous quarter. Because of our key shows like Betiyaan, Saath Phere, Kasamh Se, Teen Bahuraniyaan & Dulhann leading their own respective slots, we have now become a leader in the time band from 5 pm to 10 pm in the weekdays. During weekends, our musical show Sa Re Ga Ma Pa became the top programme in the ‘Hindi GEC’ segment despite fierce competition. As a result we now have around 20 programmes in the Top 50 which is growing by 3-5 programmes every quarter."

Zee Cinema has maintained its leadership position through constantly launching new properties - the latest being Showman Show, a tribute to India’s leading filmmaker’s (Raj Kapoor & Subhash Ghai). KLUB (targeted at the youth through relevant movies) & Cinema Hall (movie viewing experience for the Family at home) have also enabled us to further consolidate appointment viewing.

On the English GEC front, the focus was to strengthen our prime time in the relevant audience segment. Zee Café is currently the leading channel in the English GEC space, both in all day & prime time. To further capitalize on this lead, last month we announced launch of 11 new programs of which most shows are 'Current Season' episodes from the US. Zee Café, today, is the first channel in the country to run popular sitcoms simultaneously with their launch in the US thereby realizing its core proposition to its viewer. In sports, Zee Sports and Ten Sports combined are leaders with 52% relative channel share, which is more than twice that of the closest competitor." Goenka added.

Elaborating on the performance, Mr. Pradeep Guha, CEO said,

"With GRPs on a continuous rise, across all channels we have introduced a slew of ad sales initiatives, focusing on improving inventory utilization, attracting higher yielding categories of business and increasing Effective Rates across all time bands – with special focus on prime time, all of which have resulted in a revenue growth rate that is much faster than that of the industry."

Sports business to start contributing

The sports business revenues during the second quarter was Rs 42.2 crore and the EBITDA for the second quarter stood at Rs 35 lakh in comparison to a EBITDA loss of 30 lakh during the first quarter of the current fiscal year. The second quarter of FY08 has seen Zee Sports and Ten Sports reinforce their positions in both football and cricket. Zee Sports produced and telecasted the ONGC Nehru Cup football tournament from Delhi, which India won to gain the biggest international success for the national side for many years and an audience of 1.6 million for the final against Syria. More importantly, the new floodlit stadium in Delhi was packed for the final. Since then Zee Sports has also hosted the Hero Cycles Federation Cup with audience of over 600,000 for two of the final games.

Ten Sports meanwhile has acquired more cricket rights in the shape of the South African and Zimbabwe boards to add to the Sri Lanka, Pakistan and West Indies boards they currently feature. Also on screen, the two channels have been sharing the UEFA Champions League and other international football while the Noida production facilities are now supplying Ten Sports with a nightly sports news half hour show. In addition, Zee Sports has re-branded its own news and magazine shows to provide a nightly Hindi sports news show called Sports Planet and a series of five other weekly shows on the major sports.

Coming quarters of FY08, Zee Sports will showcase the launch of ‘Indian Cricket League’ (ICL) and the re-launch of the ‘National Football League’. The Football league will re-brand as the 'I League' and in the seasons to come, the plan is to increase the size of the ‘I league’ first division, from ten to sixteen clubs and that should mean several more metros being represented in the top tier of Indian soccer.

ICL belonging to Zee promoters has been making rapid progress. Having signed several internationals and 51 Indian players, the parallel competition is set to challenge the Board of Control for Cricket in India’s (BCCI) grip on game. ICL’s first tournament was in 3QFY08 and will provide exclusive content for Zee’s sports channels (Zee Sports and Ten Sports).

CAS, DTH, IPTV growth to boost subscription revenues

Digitization is being led by a government mandate to increase set-top box adoptability over Pay Cable TV, and new distribution mediums such as DTH (satellite TV). These trends will increase the reported subscriber base substantially and curb pay revenue leakages, resulting in significant increase in pay revenues for broadcasting companies.

Addressable distribution mediums such as DTH and broadband (IPTV) are likely to drive significant changes in how content is valued, resulting in an increased value disparity between strong and weak content. Broadcasters with strong or ‘killer’ content are likely to benefit the most.

With ratings for ZEE having picked up strongly over the last few quarters, it is well poised to benefit significantly from the above trends.

Renewed focus on overseas markets

Zee has renewed its focus on international markets where it licences its broadcasting rights. Although Zee broadcasts to over 120 countries, its key markets are Europe, the US, the Middle East and South Asia. Zee aims to improve its paid international reach – currently it is paid for 4.6m of the estimated 14.8m households that it reaches. Zee plans to further monetise its international reach by going pay in more regions and for more channels.

Launches ZeeNext

ZEEL recently launched a general entertainment youth-based channel, ZeeNext. This channel will be the flanking channel to Zee and will take on competition, in addition to providing new advertising inventory.

The company has decided to stop the Zee Arabia channel. Also, it is entering into a joint venture with a broadcasting company in the Middle East to launch a movie channel to broadcast Hindi films dubbed in Arabic. Also, Zee Sports would be entering the US market partnering with Dish Network.

Valuation fails to factor in ZEEL’s continuously improving stature

Improving viewer-ship and changing distribution landscape are significant opportunities for Zee, which will drive its advertisement as well as pay revenues on a sustained basis. Already w.e.f. from January 1, 2008 there would be an additional surcharge of 25% on advertisers across the board by all broadcasters. ZEEL itself would also be taking rate hikes.

Notably emerging competition from new general entertainment channels has been overestimated and the new competition is unlikely to have any significant impact on the company’s growth. Moreover its sports channel has nothing to lose evenif Zee groups’ Indian Cricket League does not fare well as all the losses and capital costs are borne by Zee group and not ZEEL. ZEEL has only to gain if ICL succeeds as it is the sole broadcaster of ICL events.

In FY 2008 we expect the company to register revenues and net profit after minority interest of Rs 1755.98 crore and Rs 389.84 crore respectively. On equity of Rs 43.36 crore and face value of Re 1 per share, EPS works out to Rs 9.0. This EPS is likely to rise to Rs 11.8 in FY 2009. The share price trades at Rs 314. P/E on FY 2009 EPS (of Rs 11.8) is 26.7, which is low considering that ZEEL is the largest listed broadcasting company in India and has good visibility of above-average earnings growth rates.

Zee Entertainment Enterprises: Consolidated Financials

 

 

0503(12)

0603(12)

0703 (12)

0803 (12P)

0903 (12P)

Sales

1275.4

1423.32

1441.10

1755.98

2194.97

OPM (%)

33.8

19.0

22.1

32.5

35.0

OP

431.64

270.20

318.80

571.45

768.24

Other inc.

55.58

64.15

63.00

88.77

100.00

PBIDT

487.22

334.35

381.80

660.22

868.24

Interest

20.66

24.16

22.00

31.31

39.14

PBDT

466.56

310.19

359.80

628.91

829.10

Dep.

32.87

39.14

22.80

27.01

31.87

PBT before EO

433.69

271.05

337.00

601.89

797.23

EO

14.00

-1.90

0.00

0.00

0.00

PBT after EO

419.69

272.95

337.00

601.89

797.23

Tax

102.32

51.56

96.40

192.61

263.09

PAT

317.37

221.39

240.60

409.29

534.14

Minority interest

11.89

4.11

21.20

19.44

23.33

Net Profit

305.55

217.37

219.40

389.84

510.81

EPS (Rs)*

7.4

4.7

5.1

9.0

11.8

# Not Annualised.
Current equity of Rs 43.36 crore.
Face Value: Rs 1
EO: Extraordinary items
EPS is calculated after excluding EO and relevant tax
Figures in Rs crore
Source: Capitaline Corporate Database

 

Zee Entertainment Enterprises: Consolidated results

 

 

0709 (3)

0609 (3)

Var. (%)

0709 (6)

0609 (6)

Var. (%)

0703 (12)

0603 (12)

Var. (%)

Sales

398.6

349.64

14

790.19

639.09

24

1441.1

1104.2

31

OPM (%)

33.1

6.2

 

31.9

13.8

 

22.1

22.4

 

OP

132.08

21.74

508

251.77

87.9

186

318.8

247.4

29

Other inc.

22.47

15.15

48

43.77

29.83

47

63

56.2

12

PBIDT

154.55

36.89

319

295.54

117.73

151

381.8

303.6

26

Interest

8.5

3.43

148

20.31

14.33

42

22

13.1

68

PBDT

146.05

33.46

336

275.23

103.4

166

359.8

290.5

24

Dep.

5.54

5.09

9

12.19

10.24

19

22.8

16

43

PBT before EO

140.51

28.37

395

263.04

93.16

182

337

274.5

23

EO

0

0

 

0

0

 

0

0

 

PBT after EO

140.51

28.37

395

263.04

93.16

182

337

274.5

23

Tax

43.45

7.36

490

84.69

18.24

364

96.4

60.3

60

PAT

97.06

21.01

362

178.35

74.92

138

240.6

214.2

12

Minority interest

4.56

-1.22

PL

8.75

0.6

999

21.2

11.7

81

Net Profit

92.5

22.23

316

169.6

74.32

128

219.4

202.5

8

EPS (Rs)*

#

#

 

#

#

 

5.1

4.7

 

# Not Annualised.
Current equity of Rs 43.36 crore. Face Value: Re 1
Var. (%) exceeding 999 has been truncated to 999
LP: Loss to Profit PL: Profit to Loss
EO: Extraordinary items
EPS is calculated after excluding EO and relevant tax
Figures in Rs crore
Source: Capitaline Corporate Databases

 

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