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Zee News - Q4 2010 Result Update

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  • 1. 4QFY2010 Result Update I Media April 21, 2010 Zee News NEUTRAL CMP Rs18 Performance Highlights Target Price - Zee News (ZNL, Ex-Regional GECs) reported a Top-line of Rs60.1cr, PAT of Investment Period - Rs2.1cr and Operating Margin of 6.5%. The numbers are strictly not comparable yoy owing to the demerger of Regional GECs to Zee Stock Info Entertainment (ZEEL) during the quarter. The management has indicated that Sector Media it is not planning any new launches/initiatives for the next two quarters, and would focus purely on consolidating its current news operations. We Market Cap (Rs cr) 428 recommend a Neutral view on the stock, due to a lack of clarity on its Beta 0.6 financials, limited growth triggers and fully-priced in valuations (based on the EV/Sales multiple). 52 WK High / Low 77/15 Limited financial disclosure: After the de-merger of Regional GECs, the ZNL Avg. Daily Volume 756,973 management has not disclosed comparable financials or complete balance Face Value (Rs) 1 sheet details of the residual business. However, during the Concall, the management indicated limited details about the residual business. Zee News BSE Sensex 17,473 (ZNL, Ex-Regional GECs) reported a Top-line of Rs60.1cr, PAT of Rs2.1cr and Nifty 5,245 Operating Margin of 6.5%. ZNL registered Rs41.7cr Advertising revenue and Rs17.1cr Subscription revenue from the residual business. The existing news Reuters Code ZEEN.BO operations, comprising of Zee News, Zee Business, Zee 24 Taas and 24 Bloomberg Code ZEEN @IN Ghanta, recorded a 30% yoy growth in advertising revenue for the quarter. The residual business has lower profitability, partially due to losses in Zee Shareholding Pattern (%) Tamizh (Tamil GEC) and losses from two newly launched news channels – Zee News UP and Zee 24 Ghantalu (Telugu News). In terms of Balance sheet Promoters 54.1 details, the Networth is Rs162cr, Gross Debt is Rs168cr, Cash is Rs8.5cr and MF/Banks/Indian FIs 29.1 Net Debt is Rs~80cr (Due to investments in interest bearing instruments). FII/NRIs/OCBs 8.5 Transferred R-GECs post Rs404cr Top-line and Rs135cr Bottom-line for Indian Public 8.3 FY2010: In ZEEL’s result announcement for 4QFY2010, the company has consolidated the results for Regional GECs for the current quarter. According #Abs. (%) 3m 1yr 3yr to the company, the Regional GECs business (transferred to ZEEL) reported a Sensex 2.5 60.3 25.7 revenue of Rs404.3cr and EBITDA of Rs126.1cr (31.1% OPM), against our estimates of Rs435cr revenue and EBITDA of Rs135cr (31% OPM). Zee News (71.5) (51.7) (56.2) Fair Value range at ~Rs18-22: Since the company has not disclosed the # Not comparable due to de-merger of R-GECs appropriate full year financial details on the residual business, we believe that on April 15, 2010 it is difficult to ascertain the right value of the stock. However, we estimate ZNL’s residual business revenue for FY2010E at Rs230cr. Based on a modest CAGR of 15% in the Top-line during FY2010-12E, we expect ZNL to post Rs305cr revenue in FY2012E. Based on ~1.7x (Base case) to 2x (Bull case) EV/Sales Multiple (comparing it to TV Today) and adjusted for Rs80cr Net debt, we have arrived at a fair value range of ~Rs18-22. Upside risks to our estimates include: 1) Any positive surprises in the annual report after complete financial disclosure, 2) Significant up-tick in Operating Margins, and 3) New channel launches or entry into new genres (less likely in near-term) Anand Shah Note: Projections/Financials not included due to lack of details after the Tel: 022 – 4040 3800 Ext: 334 de-merger. E-mail: anand.shah@angeltrade.com Chitrangda Kapur Tel: 022 – 4040 3800 Ext: 323 E-mail: chitrangdar.kapur@angeltrade.com 1 Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539
  • 2. Zee News I 4QFY2010 Result Update Exhibit 1: Financial Performance Update (Consolidated) Y/E March (Rs cr) 4QFY10# 4QFY09 % chg FY2010# FY2009 % chg Net Sales 60.1 138.4 (56.6) 529.3 522.1 1.4 Programming Cost 13.0 60.7 (78.5) 194.7 213.3 (8.7) (% of Sales) 21.7 43.8 36.8 40.9 Staff Cost 19.6 20.4 (4.2) 78.7 66.0 19.2 (% of Sales) 32.6 14.8 14.9 12.6 Administrative Cost 9.2 13.3 (31.4) 60.8 46.6 30.4 (% of Sales) 15.3 9.6 11.5 8.9 Selling and Other Cost 14.4 23.3 (38.2) 104.3 112.5 (7.3) (% of Sales) 24.0 16.8 19.7 21.6 Total Expenditure 56.2 117.7 (52.3) 438.5 438.5 0.0 Operating Profit 3.9 20.7 (81.2) 90.8 83.6 8.5 OPM (%) 6.5 14.9 17.2 16.0 Interest 3.1 14.0 (77.8) 25.9 21.1 23.1 Depreciation 2.3 2.9 (21.1) 11.2 9.5 18.0 Other Income 3.7 9.9 (62.9) 17.1 17.6 (2.4) PBT (excl Ext. Items) 2.2 13.8 (84.1) 70.8 70.6 0.2 Ext Income/(Expenses) - - - - PBT (incl. Ext Items) 2.2 13.8 (84.1) 70.8 70.6 0.2 (% of Sales) 3.6 9.9 13.4 13.5 Prov. for Taxation (0.6) 4.8 (113.0) 22.5 25.9 (13.3) (% of PBT) (28.7) 35.2 31.7 36.7 Minority Interest 0.7 0.2 2.0 0.1 Reported PAT 2.1 8.8 (76.4) 46.3 44.6 3.7 PATM (%) 3.4 6.3 8.7 8.5 Equity Shares (cr) 24.0 24.0 24.0 24.0 EPS (Rs) 0.1 0.4 1.9 1.9 Source: Company, Angel Research, #Note: Not comparable yoy due to de-merger of R-GECs April 21, 2010 2
  • 3. Zee News I 4QFY2010 Result Update Research Team Tel: 022-4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com DISCLAIMER This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Securities Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, and is for general guidance only. Angel Securities Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Securities Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Securities Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Securities Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Disclosure of Interest Statement ZNL 1. Analyst ownership of the stock No 2. Angel and its Group companies ownership of the stock No 3. Angel and its Group companies’ Directors ownership of the stock No 4. Broking relationship with company covered No Note: We have not considered any Exposure below Rs 1 lakh for Angel and its Group companies. Address: Acme Plaza, ‘A’ Wing, 3rd Floor, M.V. Road, Opp. Sangam Cinema, Andheri (E), Mumbai - 400 059. Tel : (022) 3952 4568 / 4040 3800 Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP000001546 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE: INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946 Angel Capital & Debt Market Ltd: INB 231279838 / NSE FNO: INF 231279838 / NSE Member code -12798 Angel Commodities Broking (P) Ltd: MCX Member ID: 12685 / FMC Regn No: MCX / TCM / CORP / 0037 NCDEX : Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302 April 21, 2010 3

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