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„ EBITDA and net profit ahead of UBS estimates
IBN18 (restructured) reported 3QFY11 results: Revenues grew 20.9% yoy to
Rs3.15bn (UBS-e Rs3.02bn). EBITDA grew 123% yoy to Rs550m (UBS-e
Rs273m); EBITDA margin expanded 800 bps yoy to 17.5%. IBN18 achieved net
profit breakeven in 3QFY11 and reported net profit of Rs310m ahead of UBS-e at
Rs30m and consensus estimates at Rs2m. These numbers include the business
news channels acquired from TV18 as part of business restructuring.
„ Strong performance at Viacom18 contributed to EBITDA
Viacom18 (IBN18’s 50:50 JV with Viacom) revenues grew 21% yoy to Rs3.23bn
(UBS-e Rs3.33bn) due to strong growth in advertising revenues. EBITDA grew
467% to Rs510m (UBS-e Rs249m). Viacom18 reported net profit of Rs460m
(UBS-e Rs169m).
„ Key takeaways from conference call
1) Subscription revenues currently constitute 10-11% of revenues. IBN18 expects
subscription revenues to start growing from FY12 and expects it to grow 2.5-3.0x
from current levels over the next three years. 2) IBN18 has received shareholders
approval for the restructuring and expects the court process to complete within the
next 4 months. 3) IBN18 plans to increase number of original programming hours
from current levels of 23-24 hours/week primarily in non prime time.
„ Valuation: Maintain Buy with DCF based price target of Rs130
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool. We assume 13.0% WACC.
Q IBN18 Broadcast
IBN18 was incorporated in June 2005 as Global Broadcast News and started
commercial operations in December 2005. IBN18 operates news channels CNN
IBN and IBN7. It is a subsidiary of Network18 Group, a media conglomerate in
India. IBN18 has a 50:50 JV with Viacom named Viacom18, which operates
Colors, MTV, VH1 and Nickelodeon. IBN18 also operates regional (Marathi)
news channel, IBN Lokmat, under a 50:50 JV with Lokmat Group (IBN
Lokmat). IBN18 acquired the business news channels (CNBC TV18 and CNBC
Awaaz) from TV18 in a group restructuring in July 2010.
Q Statement of Risk
We believe the key risks for IBN18 are: 1) excessive competition in most of its
broadcasting genres, especially the Hindi GEC; 2) heavy reliance on advertising
revenue; and 3) regulatory, as the news segment of the India broadcasting
industry is exposed to significant regulation on up-linking guidelines and
ownership.
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UBS Investment Research
IBN18 Broadcast
Strong results; EBITDA growth surprised
IBN18 (restructured) reported 3QFY11 results: Revenues grew 20.9% yoy to
Rs3.15bn (UBS-e Rs3.02bn). EBITDA grew 123% yoy to Rs550m (UBS-e
Rs273m); EBITDA margin expanded 800 bps yoy to 17.5%. IBN18 achieved net
profit breakeven in 3QFY11 and reported net profit of Rs310m ahead of UBS-e at
Rs30m and consensus estimates at Rs2m. These numbers include the business
news channels acquired from TV18 as part of business restructuring.
„ Strong performance at Viacom18 contributed to EBITDA
Viacom18 (IBN18’s 50:50 JV with Viacom) revenues grew 21% yoy to Rs3.23bn
(UBS-e Rs3.33bn) due to strong growth in advertising revenues. EBITDA grew
467% to Rs510m (UBS-e Rs249m). Viacom18 reported net profit of Rs460m
(UBS-e Rs169m).
„ Key takeaways from conference call
1) Subscription revenues currently constitute 10-11% of revenues. IBN18 expects
subscription revenues to start growing from FY12 and expects it to grow 2.5-3.0x
from current levels over the next three years. 2) IBN18 has received shareholders
approval for the restructuring and expects the court process to complete within the
next 4 months. 3) IBN18 plans to increase number of original programming hours
from current levels of 23-24 hours/week primarily in non prime time.
„ Valuation: Maintain Buy with DCF based price target of Rs130
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool. We assume 13.0% WACC.
Q IBN18 Broadcast
IBN18 was incorporated in June 2005 as Global Broadcast News and started
commercial operations in December 2005. IBN18 operates news channels CNN
IBN and IBN7. It is a subsidiary of Network18 Group, a media conglomerate in
India. IBN18 has a 50:50 JV with Viacom named Viacom18, which operates
Colors, MTV, VH1 and Nickelodeon. IBN18 also operates regional (Marathi)
news channel, IBN Lokmat, under a 50:50 JV with Lokmat Group (IBN
Lokmat). IBN18 acquired the business news channels (CNBC TV18 and CNBC
Awaaz) from TV18 in a group restructuring in July 2010.
Q Statement of Risk
We believe the key risks for IBN18 are: 1) excessive competition in most of its
broadcasting genres, especially the Hindi GEC; 2) heavy reliance on advertising
revenue; and 3) regulatory, as the news segment of the India broadcasting
industry is exposed to significant regulation on up-linking guidelines and
ownership.
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