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Improving trends
Dish TV’s FY11 annual report reveals, subscriptions have grown faster
than all other revenue streams and lower content cost remain a key
driver of profitability. Meanwhile although there are certain qualifications
by auditors on rental revenues and restructuring, loans to subsidiary and
related parties is down 79%YoY and business post Rs11.4bn rights and
Rs4.7bn GDR issues is funded for growth. We maintain our forecast of a
67% Ebitda Cagr but there still remains uncertainty on implementation of
the regulatory boost of pending legislation on licence fees and digitisation
both of which are significant positives.
Subscription and content cost trend
Dish TV’s FY11 annual report reveal, subscription revenues have grown faster at
42%Cagr versus total at 39%Cagr over FY09-11. Subscriptions account for 83%
of total revenues and will account for 92% share by FY14CL and are the key
driver of growth fuelled by subscribers expected to grow 19% Cagr to 18m by
FY14CL. Meanwhile Dish TV demonstrated tremendous cost controls led by fixed
fee content interconnect agreements with all broadcasters except Sun TV enabling
content cost drop 12ppt to 35% of revenues in FY11. Consequently margins
improved 34ppt over the period to 17% in FY11. We expect margins to improve a
further 9ppt to 28% by FY14CL as Dish TV benefits from better spread of content
cost and operating leverage.
Key auditor qualifications
Dish TV’s annual report also reveals certain qualifications, one that the life of
customer premise equipment (CPE) for depreciation has been estimated as five
years however in some cases the upfront advance contribution towards CPE is
recognised over three years thus overstating CPE rental revenues marginally.
Second auditors have qualified that in the scheme of arrangement between Dish
TV and its two subsidiaries (Agrani Satellite Services and Integrated Subscriber
Management Services), company did not recognised the loss on impairment of
fixed assets of Rs1.7bn through profit and loss account and instead routed
Rs1.5bn through general reserve and recognised Rs233m as goodwill which does
not have any future economic benefit. Third Dish TV faces a demand notice from
income tax for Rs406m towards short deduction of TDS for which no provision has
been made and is included in contingent liabilities. The contingent liabilities in
turn have jumped 3.5x in FY11 to Rs831m.
Reduction in loans and advances
In FY11 Dish TV loans to subsidiaries and related parties is down 79%YoY to
Rs1.2bn. As of end FY11 less than Rs0.5bn was still pending return from related
parties addressing a key investor concern. Also on funding of the business, loans
increased 15%YoY to Rs10.8bn, while post Rs11.4bn rights issue and Rs4.7bn
global depository receipt (GDR) placement Dish TV is well funded for growth. We
maintain our forecast of a 67% Ebitda Cagr but there still remains uncertainty on
implementation of the regulatory boost of pending legislation on licence fees and
digitisation both of which are significant positives. Maintain OPF.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Improving trends
Dish TV’s FY11 annual report reveals, subscriptions have grown faster
than all other revenue streams and lower content cost remain a key
driver of profitability. Meanwhile although there are certain qualifications
by auditors on rental revenues and restructuring, loans to subsidiary and
related parties is down 79%YoY and business post Rs11.4bn rights and
Rs4.7bn GDR issues is funded for growth. We maintain our forecast of a
67% Ebitda Cagr but there still remains uncertainty on implementation of
the regulatory boost of pending legislation on licence fees and digitisation
both of which are significant positives.
Subscription and content cost trend
Dish TV’s FY11 annual report reveal, subscription revenues have grown faster at
42%Cagr versus total at 39%Cagr over FY09-11. Subscriptions account for 83%
of total revenues and will account for 92% share by FY14CL and are the key
driver of growth fuelled by subscribers expected to grow 19% Cagr to 18m by
FY14CL. Meanwhile Dish TV demonstrated tremendous cost controls led by fixed
fee content interconnect agreements with all broadcasters except Sun TV enabling
content cost drop 12ppt to 35% of revenues in FY11. Consequently margins
improved 34ppt over the period to 17% in FY11. We expect margins to improve a
further 9ppt to 28% by FY14CL as Dish TV benefits from better spread of content
cost and operating leverage.
Key auditor qualifications
Dish TV’s annual report also reveals certain qualifications, one that the life of
customer premise equipment (CPE) for depreciation has been estimated as five
years however in some cases the upfront advance contribution towards CPE is
recognised over three years thus overstating CPE rental revenues marginally.
Second auditors have qualified that in the scheme of arrangement between Dish
TV and its two subsidiaries (Agrani Satellite Services and Integrated Subscriber
Management Services), company did not recognised the loss on impairment of
fixed assets of Rs1.7bn through profit and loss account and instead routed
Rs1.5bn through general reserve and recognised Rs233m as goodwill which does
not have any future economic benefit. Third Dish TV faces a demand notice from
income tax for Rs406m towards short deduction of TDS for which no provision has
been made and is included in contingent liabilities. The contingent liabilities in
turn have jumped 3.5x in FY11 to Rs831m.
Reduction in loans and advances
In FY11 Dish TV loans to subsidiaries and related parties is down 79%YoY to
Rs1.2bn. As of end FY11 less than Rs0.5bn was still pending return from related
parties addressing a key investor concern. Also on funding of the business, loans
increased 15%YoY to Rs10.8bn, while post Rs11.4bn rights issue and Rs4.7bn
global depository receipt (GDR) placement Dish TV is well funded for growth. We
maintain our forecast of a 67% Ebitda Cagr but there still remains uncertainty on
implementation of the regulatory boost of pending legislation on licence fees and
digitisation both of which are significant positives. Maintain OPF.
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