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UTV: Met with CEO; Current verticals past the investment phase; Content for the 3G/4G space next big opportunity
We met with Mr Ronnie Screwvala, CEO UTV (UTV IN, Mkt Cap US$540m, CMP Rs597, Not Rated). Key takeaways:
- The company claims to have demonstrated sustained performance and delivered results in its motion pictures and television divisions.
- With upcoming publishing deal for its first IP in the console gaming space, all the three verticals would be past the investment phase.
- UTV is actively looking at content creation/partnerships in the 3G/4G space which could be the next big opportunity to drive revenues for the media sector, and would require customized content development for the platform.
Television (Broadcasting, TV content, and quasi broadcasting on Sun TV channels)
- FY11 revenue estimated at ~Rs3.5b (up 40% YoY), largely driven by ad growth.
- In FY10 UTV had reported revenue of Rs1b in the TV content business (including quasi broadcasting) and Rs1.5b in broadcasting business.
- In broadcasting, segment UTV has four channels: Bindass (youth channel), UTV Movies (Hindi movies), UTV Action (dubbed action movies), and UTV World Movies (foreign movies).
- Youth channel Bindass is already at ~0.6x the revenue run-rate of genre leader MTV (MTV revenue estimated at ~Rs1.4b).
- EBITDA margin in broadcasting business to be ~15% in FY11; UTV targets 25-30% EBITDA margin in this business.
- No immediate plans for new channel launches.
- For broadcasting business, 88% inventory for FY11 was already sold as of September 2010 implying good revenue visibility.
Motion pictures
- UTV is the No.1 studio in the country.
- 10-11 movies to be released in FY11, including 5 more movies in the rest of FY11.
- “Guzarish” would be releasing on November 19 while “Tees Maar Khan” is slated for release in the Christmas week.
- Business model is de-risked with 50-55% of costs being covered through pre-sale.
- Expect Rs4.5b revenue in FY11 and Rs6b in FY12.
- 15 movies lined up for FY12 with strong visibility on 9-10 of these.
Games (Indiagames, True Games and Ignition)
- FY11 revenue from gaming division is expected at ~1.3b (up ~37% YoY).
- Mobile gaming (Indiagames) to clock revenue of ~Rs500m in FY11 and to be profitable at EBITDA level in FY11.
- Online gaming (True Games) to release three games in 4QFY11; the company expects Rs250m revenue in FY11.
- In console games (Ignition), minimum guarantee (MG) deal for first of the 3 IPs (El Shaddai) would be complete this calendar.
- The company has invested ~US$25m in this game, minimum guarantee expected is US$15-20m.
- There would be value unlocking (in 12-18 months) in this division once the deal for first IP is through.
- Deals for two other IPs would be in CY11.
3G/4G
- UTV believes it has the creative talent to actively pursue content opportunity in the upcoming 3G/4G domain.
- UTV is actively looking at content creation/partnerships.
- Revenue share with telcos in this segment likely to be in the 40% range v/s 15-25% currently.
At CMP of Rs597, the stock trades at ~19x FY11 EPS of Rs32.3 and ~13x FY12 EPS of Rs45 based on consensus estimates. Not Rated.
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