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Zee Entertainment Enterprise Limited
Poor 3QF11 Result: Programming Cost Jumps
Quick Comment – Impact on our views: The near
term concerns on the setback in rating points and their
earnings impact seems to be reflected in the stock price
post the recent underperformance of the stock. The
stock looks attractive from a 12 month perspective as:
(a) ZEEL’s subscription revenue gains from digitization
start to accelerate in next 2-3 quarters; (b) competitors’
program spend starts plateauing in the next 1-2 quarters
and ZEEL's efforts to spend more on content start
improving its ad revs; and (c) ZEEL may look to return
cash or open up some new revenue streams in 2011.
What's new: ZEEL’s adjusted PAT stood at Rs1.06 b,
down 16% QoQ and 18% below our estimates. The
disappointment was mainly due to lower subscription
revenues and higher programming costs this quarter.
Adjusted EBITDA margin stood at 20.4% vs our
expectation of 25.3% and 26% in 2QF11. Reported PAT
at Rs.1.6 b was up 23% QoQ and 6%YoY.
Key highlights of the quarter
• Advertising revenues grew 7% sequentially to Rs4.4b.
We feel this could have been higher given the
seasonality, had it not been for ZEEL’s recent slippage
on TV rating points
• DTH revenues disappointed again at Rs821m growing
4% QoQ which in our view was on the modest side.
• Programming costs as a % of revenues grew from
49% in 2QF11 to 55% in 3QF11 compressing margins.
• There was a one-time settlement amount of Rs.700m
due to premature termination of a sporting event rights.
Conference Call on 17th Jan +91 22 3065 0074 at
2:00pm India time.
Key properties planned in the forthcoming quarter
include Zee Cine Awards, premier of Peeplie Live and
Akrosh and Best of Shanivaar ki Raat Amitabh ke Saath
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