Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Zee Entertainment Enterprises
Neutral
ZEE.BO, Z IN
Sports business drives strong performance for
Q4FY11
• Q4FY11 earnings beat our and street expectations by a wide margin
driven largely by the better than expected performance of the sports
business. ZEEL reported 23%, 23% and 47% y/y growth for revenue,
EBITDA and PAT respectively. Advertising and subscription revenue
growth was 36% and 24% y/y respectively. Overall Q4 was a reversal of
Q3FY11’s weak performance on two key parameters - sports business
profitability and DTH revenue growth. Sports losses declined significantly
from Rs1030mn in Q3FY11 to Rs152mn in Q4.
• Strong DTH revenues was another +ve surprise. ZEEL reported 44% y/y
and 20% q/q increase in DTH subscription revenues during Q4FY11 (vs
subdued +4% q/q growth in Q3FY11). Share of DTH (as % of domestic
subscription revenues) which had remained stable at 44-45% for past 4 qtrs
moved up to 49% in Q4FY11. This growth was also aided by addition of
new sports channel Ten Cricket. After 5 qtrs of flat overseas subscription
revenues, there was an uptick of 7% y/y & q/q.
• Management call takeaways. 1) TV ad revenue growth for FY12 expected
at 12-14%, 2) Sports division’s losses to moderate in FY12 to Rs0.8-1bn vs
Rs2bn in FY11, 3) Programming hours to expand starting Q2FY12, 4) DTH
yields stable at Rs19/sub.
• Cash levels increase to Rs12.5bn as of Mar’11. Management noted that
cash will be utilised for share buybacks and investments in existing and new
channels. However, the dividend payout ratio is unlikely to change from
current levels of 25-30%.
• Earnings revisions. Due to lower than expected sports business losses and
higher DTH subscription revenues, we raise our FY12/13E EPS by 12-14%,
taking our estimates close to what we had built in prior to the disappointing
Q3FY11 earnings performance. As a result our Sep’11 TP rises to Rs145.
We see sustained uptrend in viewership ratings, margin performance for
non-sports business (in view of higher costs and competitive enviornment)
and sports business profitability as key catalysts for a stock re-rating.
Conference Call – Key takeaways
Advertising growth outlook. Management expects TV industry’s ad revenue
growth for FY12 to be around 12-14% and expects ZEEL to meet or better this. Ad
growth of 36% y/y in Q4FY11 was supported by higher revenues generated by sports
business.
Programming hours to increase. Management noted that there is lot of activity in
terms of big ticket shows being launched and ZEEL will likely expand its
programming hours starting Q2FY12 (post IPL).
Sports business losses to be contained at Rs800-1000mn. In the previous Q3FY11
call, management had noted that economics for sports business are not favorable
considering higher costs for acquiring sporting rights and inadequate monetization of
subscription revenues for the same. During Q3FY11, much of the losses for the
sports business were on account of lower than expected generation of revenues for
the India-South Africa Test series. However in Q4FY11 sports business losses were
restricted to Rs152mn on account of better monetisation of India South Africa One
Day series. Management expects losses to reduce from Rs2bn in FY11 to Rs0.8-1bn
in FY12 as costs should moderate considerably.
Over medium to long term, company expects sports business margins to benefit from
rising digitalization which will help monetize premium subscription for it.
DTH revenues supported by monetisation of new channel of Ten Cricket. During
Q4FY11 DTH accounted for 49% share of domestic subscription revenues (vs 44-
45% over past 4 qtrs). Management remains upbeat on growth of this revenue stream
driven by higher DTH subscribers (expected addition of 11-12mn subscribers per
annum). DTH yields remain stable at nearly Rs19/sub. They are likely to remain
subdued on account of fixed fee contracts signed with some DTH players. ZEEL
currently has nearly 17.1mn of DTH subscriber base for their channels (industry size
is 34mn currently).
Overseas subscription revenues picked up (7% y/y and q/q growth after 5 qtrs of
stable revenues) driven by better growth in US and Middle East markets and higher
sports pay revenue
Balance Sheet color. Gross debt on ZEEL’s books as of Mar’11 end was Rs12mn
while net cash (including inter company deposits of Rs2.5bn) was Rs12.5bn.
Management noted that cash will be utilised for share buy back and investments in
existing and new channels. However the dividend payout ratio is unlikely to change
from current levels of 25-30%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Zee Entertainment Enterprises
Neutral
ZEE.BO, Z IN
Sports business drives strong performance for
Q4FY11
• Q4FY11 earnings beat our and street expectations by a wide margin
driven largely by the better than expected performance of the sports
business. ZEEL reported 23%, 23% and 47% y/y growth for revenue,
EBITDA and PAT respectively. Advertising and subscription revenue
growth was 36% and 24% y/y respectively. Overall Q4 was a reversal of
Q3FY11’s weak performance on two key parameters - sports business
profitability and DTH revenue growth. Sports losses declined significantly
from Rs1030mn in Q3FY11 to Rs152mn in Q4.
• Strong DTH revenues was another +ve surprise. ZEEL reported 44% y/y
and 20% q/q increase in DTH subscription revenues during Q4FY11 (vs
subdued +4% q/q growth in Q3FY11). Share of DTH (as % of domestic
subscription revenues) which had remained stable at 44-45% for past 4 qtrs
moved up to 49% in Q4FY11. This growth was also aided by addition of
new sports channel Ten Cricket. After 5 qtrs of flat overseas subscription
revenues, there was an uptick of 7% y/y & q/q.
• Management call takeaways. 1) TV ad revenue growth for FY12 expected
at 12-14%, 2) Sports division’s losses to moderate in FY12 to Rs0.8-1bn vs
Rs2bn in FY11, 3) Programming hours to expand starting Q2FY12, 4) DTH
yields stable at Rs19/sub.
• Cash levels increase to Rs12.5bn as of Mar’11. Management noted that
cash will be utilised for share buybacks and investments in existing and new
channels. However, the dividend payout ratio is unlikely to change from
current levels of 25-30%.
• Earnings revisions. Due to lower than expected sports business losses and
higher DTH subscription revenues, we raise our FY12/13E EPS by 12-14%,
taking our estimates close to what we had built in prior to the disappointing
Q3FY11 earnings performance. As a result our Sep’11 TP rises to Rs145.
We see sustained uptrend in viewership ratings, margin performance for
non-sports business (in view of higher costs and competitive enviornment)
and sports business profitability as key catalysts for a stock re-rating.
Conference Call – Key takeaways
Advertising growth outlook. Management expects TV industry’s ad revenue
growth for FY12 to be around 12-14% and expects ZEEL to meet or better this. Ad
growth of 36% y/y in Q4FY11 was supported by higher revenues generated by sports
business.
Programming hours to increase. Management noted that there is lot of activity in
terms of big ticket shows being launched and ZEEL will likely expand its
programming hours starting Q2FY12 (post IPL).
Sports business losses to be contained at Rs800-1000mn. In the previous Q3FY11
call, management had noted that economics for sports business are not favorable
considering higher costs for acquiring sporting rights and inadequate monetization of
subscription revenues for the same. During Q3FY11, much of the losses for the
sports business were on account of lower than expected generation of revenues for
the India-South Africa Test series. However in Q4FY11 sports business losses were
restricted to Rs152mn on account of better monetisation of India South Africa One
Day series. Management expects losses to reduce from Rs2bn in FY11 to Rs0.8-1bn
in FY12 as costs should moderate considerably.
Over medium to long term, company expects sports business margins to benefit from
rising digitalization which will help monetize premium subscription for it.
DTH revenues supported by monetisation of new channel of Ten Cricket. During
Q4FY11 DTH accounted for 49% share of domestic subscription revenues (vs 44-
45% over past 4 qtrs). Management remains upbeat on growth of this revenue stream
driven by higher DTH subscribers (expected addition of 11-12mn subscribers per
annum). DTH yields remain stable at nearly Rs19/sub. They are likely to remain
subdued on account of fixed fee contracts signed with some DTH players. ZEEL
currently has nearly 17.1mn of DTH subscriber base for their channels (industry size
is 34mn currently).
Overseas subscription revenues picked up (7% y/y and q/q growth after 5 qtrs of
stable revenues) driven by better growth in US and Middle East markets and higher
sports pay revenue
Balance Sheet color. Gross debt on ZEEL’s books as of Mar’11 end was Rs12mn
while net cash (including inter company deposits of Rs2.5bn) was Rs12.5bn.
Management noted that cash will be utilised for share buy back and investments in
existing and new channels. However the dividend payout ratio is unlikely to change
from current levels of 25-30%.
No comments:
Post a Comment