Visit http://indiaer.blogspot.com/ for complete details �� ��
INITIATING COVERAGE
Entertainment Network — Ruling The Airwaves
Entertainment Network — Ruling The Airwaves
Initiating coverage with a BUY rating
We initiate coverage on ENIL with a BUY. We value ENIL on a SOTP basis with a TP of Rs275 (Radio Mirchi: DCF valuation Rs260/sh plus Event Management at 1yr fwd1x EV/sales Rs15/sh). This indicates an upside of 25% from current levels. In our view, improving ad spend, changes in the royalty structure and announcement of phase 3 policy will transform business dynamics of the radio industry. ENIL, the leading player, is expected to benefit the most.
Leadership to reflect in strong operational and financial growth
ENIL has 32 radio stations across India. Radio Mirchi is the leader in the key markets of Mumbai, Kolkata and Delhi whereas it is close to #2 in Bangalore. According to the IRS, Radio Mirchi has a listenership of nearly 42mn, double the size of the next radio brand. Based on its strengths and improvement in the macroeconomic scenario, we expect strong growth in operational and financial parameters over the next few years.
Policy on royalty structure to boost margins
The Copyright Board’s latest verdict of moving from fixed-cost royalty to the revenue-sharing option (2% of net revenue) is a big positive for ENIL. In FY10, the royalty costs accounted for 7.2% of the company’s revenue. Going forward, we expect this ratio to fall and help expand the company’s margins.
Phase 3 policy to change the landscape to ENIL’s benefit
Resolution of the royalty issue paves the way for the much anticipated phase 3 policy for FM radio. ENIL believes that most of the industry demands will be met by the new policy. Highlights anticipated in phase 3 policy include: (1) geographical expansion (increase in # of FM channels and # of cities); (2) allowing ownership of multiple frequencies in a city; (3) permitting transfer of licenses; (4) allowing networking; and (5) permitting news and current affairs content. If implemented, this will provide a strong fillip to the industry.
Strong cash balance: Well geared to participate in phase 3 policy
Post the sale of its OOH subsidiary to BCCL, ENIL has net cash of over Rs850mn. Also ENIL is generating ~Rs40-50mn free cash flow on a monthly basis. This will help the company participate aggressively in the upcoming phase 3 auction. We expect ENIL to acquire spectrum in existing cities as well as expand into new territories. This will widen its offering and help increase its bargaining power with national advertisers.
We initiate coverage on ENIL with a BUY. We value ENIL on a SOTP basis with a TP of Rs275 (Radio Mirchi: DCF valuation Rs260/sh plus Event Management at 1yr fwd1x EV/sales Rs15/sh). This indicates an upside of 25% from current levels. In our view, improving ad spend, changes in the royalty structure and announcement of phase 3 policy will transform business dynamics of the radio industry. ENIL, the leading player, is expected to benefit the most.
Leadership to reflect in strong operational and financial growth
ENIL has 32 radio stations across India. Radio Mirchi is the leader in the key markets of Mumbai, Kolkata and Delhi whereas it is close to #2 in Bangalore. According to the IRS, Radio Mirchi has a listenership of nearly 42mn, double the size of the next radio brand. Based on its strengths and improvement in the macroeconomic scenario, we expect strong growth in operational and financial parameters over the next few years.
Policy on royalty structure to boost margins
The Copyright Board’s latest verdict of moving from fixed-cost royalty to the revenue-sharing option (2% of net revenue) is a big positive for ENIL. In FY10, the royalty costs accounted for 7.2% of the company’s revenue. Going forward, we expect this ratio to fall and help expand the company’s margins.
Phase 3 policy to change the landscape to ENIL’s benefit
Resolution of the royalty issue paves the way for the much anticipated phase 3 policy for FM radio. ENIL believes that most of the industry demands will be met by the new policy. Highlights anticipated in phase 3 policy include: (1) geographical expansion (increase in # of FM channels and # of cities); (2) allowing ownership of multiple frequencies in a city; (3) permitting transfer of licenses; (4) allowing networking; and (5) permitting news and current affairs content. If implemented, this will provide a strong fillip to the industry.
Strong cash balance: Well geared to participate in phase 3 policy
Post the sale of its OOH subsidiary to BCCL, ENIL has net cash of over Rs850mn. Also ENIL is generating ~Rs40-50mn free cash flow on a monthly basis. This will help the company participate aggressively in the upcoming phase 3 auction. We expect ENIL to acquire spectrum in existing cities as well as expand into new territories. This will widen its offering and help increase its bargaining power with national advertisers.
No comments:
Post a Comment