It's prime time for media stocks

STREET CUES

Last week, media stock Global Broadcast News, part of the Television Eighteen India (TV18) group, made a sizzling debut on the bourses with 104 per cent gains.

Brokerage house Edelweiss Securities sees an upside for TV18, in the media space. Analysts say TV18 reported better-than-expected revenues of Rs 64.80 crore, a growth of 67.1 per cent y-o-y and 22.1 per cent q-o-q.

The growth in revenues was driven by 40 per cent growth in news operations and more than doubling of revenues from internet operations.

After the restructuring, the business of Hindi consumer channel, Awaaz, has now come under TV18. Also, all the web businesses, including ibnlive.com, are now housed in TV18's internet subsidiary Web18, in which TV18 holds 85 per cent stake.

Revenues from the news operations of CNBC and Awaaz stood at Rs 58.04 crore, up 21.7 per cent q-o-q. Revenues from news operations "� after adjusting that of Awaaz "� grew 40.1 per cent y-o-y, while the revenues from the Net segment of Web18 more than doubled on a y-o-y basis to Rs 6.73 crore.

"Though TV18 has not given a break-up of the revenue contribution from Awaaz, we reckon that the channel would have contributed approximately Rs 8.0 crore to the revenues, thereby, implying revenues of Rs 56.80 crore from CNBC channel and the internet businesses. If we were to remove the effect of Awaaz, revenues still grew at a handsome growth rate of 46 per cent y-o-y." said Priyank Singhal, research analyst, Edelweiss Securities.

EBITDA margins improved by 100 bps on a sequential basis. Operating margins from the news operations improved by 360 bps q-o-q to 51.4 per cent, while they declined by 800 bps q-o-q to 31.5 per cent from the internet businesses.

"We continue to remain positive on the outlook of TV18. With ad spend expected to grow at more than 15 per cent CAGR over FY06-09E.We believe that TV18 with its strong leadership position in the business news genre is well placed to exploit this opportunity," Singhal said.

"The stock has given phenomenal returns over the past one year and currently trades at PE of 42.3x and 33.5x our FY08E and FY09E, respectively. So while our positive view continues, given its rich valuations, we revise our recommendation to 'accumulate'," he added.

Nikhil Vora, lead analyst, SSKI, maintains an 'underperformer call' on TV Today. Although TV Today posted a strong set of numbers, his negative bias on the company stems from the business model that lacks scalability compared to the bigger moves by its peers such as TV18 and NDTV.

TV Today reported robust 26 per cent growth in revenues at Rs 57.10 crore in the third quarter. EBITDA margins expanded by 200 bps with other overheads dropping to 15.2 per cent in Q3FY07, from 25 per cent in Q3FY06. PAT surged by 66 per cent to Rs 14.20 crore, aided by Rs 4.60 crore other income.

"Unlike its peers TV Today has been taking baby steps. Given the Rs 100 crore of cash on books, it could have scaled up its model at a faster pace," Vora said.

"With plateauing viewership of Aaj Tak, TV Today's longer-term growth is capped and its other revenue earners just add marginally to the revenues. While we see immense strategic value given the Aaj Tak brand franchise, we see limited value for financial investors, even at low valuations of 15x FY08E earnings," he added.