Zee Entertainment: Dividend and Bonus Announcement-Remain OW
Quick Comment – Impact on our views: We remain
OW on the stock since in our view: A) ZEEL should gain
materially from the advertising growth pickup in India
with its thrust in Programming and track of consistent
ratings; B) we project a healthy 21% CAGR for
Subscription revenues over F10-F13e, aided by the
spread of digital distribution.
What's new: ZEEL has announced that the Board of
Directors has approved a final dividend of Rs.2 per
equity share in addition to the Rs.2 special interim
dividend recommended in April 2010 and which has
already been paid out to shareholders. It has also
recommended an issue of Bonus shares in the ratio 1:1,
subject to approval from shareholders.
What this means: This implies a dividend yield of 1.5%
and a payout ratio of ~36% for F10, the highest in the
last 8 years. We have been highlighting the company’s
intention of returning cash to its shareholders in the
absence of finding any high return projects. We feel this
announcement is a step in the right direction for ZEEL.
With a strong balance sheet (net cash at ~6% of market
cap) the company is well-placed against competition.
Other announcements:
The company has claimed an offset against the brought
forward losses of the 9X channel and hence the
provision for tax in the audited results stands at Rs.574
mn vs. Rs.2.2 b earlier.
The scheme of amalgamation of ETC networks with
ZEEL from the appointed date of March 31 2010 and
subsequent demerger of Education business
undertaking into ZEE Learn from the appointed date of
April 1, 2010 has been approved by the High Court and
has become effective from August 30, 2010.
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