HT Media: In-line 4QFY11 but disappointment elsewhere􀁠 Kotak Sec

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HT Media (HTML)
Media
In-line 4QFY11 but disappointment elsewhere. HTML reported robust consolidated
4QFY11 EBITDA at Rs844 mn (+5% yoy, -3% qoq), in line with expectations. Strong
20% yoy advertising growth and 25% yoy revenue growth (Fever FM and HT-Burda)
were negated by a 43% yoy increase in newsprint costs (unfavorable base given bottom
of newsprint cycle in 4QFY10). Consolidated tax rate remained low at 24%, resulting in
10% yoy growth in consolidated PAT. We retain our ADD rating with a 12-month
SOTP-based TP of Rs170 given fair 9X FY2012E EV/EBITDA valuations but FY2011
dividend of Rs0.36/share disappointed (Rs19/share net cash on books).
In-line 4QFY11 driven by robust advertising growth but dividend payout disappointing
􀁠 HT Media reported standalone 4QFY11 EBITDA at Rs806 mn (+15% yoy, -1% qoq), marginally
ahead of expectations, driven by robust advertising revenue growth in the English print business
(negated by sharp yoy increase in RM costs as 4QFY10 was the bottom of newsprint cycle) and
Fever FM radio (CWC 2011).
􀁠 However, the key (and surprising) disappointment in 4QFY11 went beyond the financials.
HTML announced 4QFY11 dividend payout of Rs0.36/share (~5% dividend payout on FY2011
EPS of Rs7.7/share) despite Rs19/share of net cash on the books. Effectively, HTML has just
passed through the dividend announced by subsidiary HMVL.
􀂃 We highlight that the HT Media’s English print business has modest capex requirement
(likely for expansion of HT Mint) given revamped printing infrastructure in Delhi and Mumbai
previously. HT may also require investment for expansion of its FM radio business in Phase-III
licensing but legacy businesses will also generate cash in FY2012E.
Fair valuations but sensitivity to interest rate cycle and loss-making businesses are risks
We retain our ADD rating on HT Media with SOTP-valuation of Rs170 (unchanged) given fair
valuations at 9X FY2012E EV/EBITDA (see Exhibits 2-3). We have fine-tuned our FY2012E-13E EPS
estimates to Rs8.6 (Rs8.8 previously) and Rs11.3 (Rs11.7) due to marginal reduction in advertising
revenue growth given rising interest rate cycle and the impact on print advertisers (Real Estate for
example). Robust traction in HT Mumbai and HT Mint may eventually give HTML a significant
strategic toehold in BFSI, Auto and Luxury retail advertising segments. Finally, competitive intensity
in the Mumbai market remains high with DNA’s continued circulation investment, resulting in
(further) extended breakeven period for HT Mumbai, in our view. The unfavorable advertising
revenue base in FY2011 may also impact reported financial performance though we remain
sanguine on RM cost inflation (exists but contained). The lack of triggers and low dividend payout
precludes a meaningful rerating of the stock.