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India Equity Research Reports, IPO and Stock News
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SUN TV NETWORK
PRICE: RS.303 RECOMMENDATION: BUY
TARGET PRICE: RS.391 FY12E P/E: 13.6X
In a status report submitted to the Supreme Court on Thursday, the CBI has reportedly
said that there is no evidence that Mr. Dayanidhi Maran used coercive tactics
to force Mr. C Sivasankaran to sell Aircel Ltd to Maxis Communications. However,
the agency's counsel has told the court that investigations would continue since
there was evidence to suggest that there was a deliberate delay in granting of license
to Aircel.
The issue is of importance to Sun TV Network stock. News of alleged wrong-doing
in the deal, coupled with Maxis' purchase of a stake in Sun Direct, the DTH entity
promoted by Mr. Kalanithi Maran (promoter of Sun TV), is behind the severe de-rating
that Sun TV has witnessed in the past eight months.
Although we are in no position to understand whether CBI shall eventually gather
enough evidence, we believe that the current news-flow is a positive for Sun TV, in
that CBI has no evidence as of now of alleged quid pro quo between Maxis and Mr.
Maran/ relatives'. As per media reports, the CBI is set to interrogate Mr. Dayanidhi
Maran and Mr. T. Ananda Krishnan, the promoter of Maxis, in the next fortnight.
The CBI status report is the first positive piece of news that Sun TV Network stock
has received in a fairly long time.
We have so far held the view that although Sun TV Network assets should be valued
aggressively, the overhang of investigations underway could have a negative impact
on the stock. The same was the key factor that motivated our downgrade (to ACCUMULATE)
on Sun TV Network. We believe the current news-flow is incrementally
positive for Sun TV Network.
The stock is trading at 13.6x PER FY12, at the lower end of its five year PER band.
Our prior price target, Rs 342, accounted for a 30% discount to fair value of Sun TV
Network (we see fair value of operations of the company at Rs 489/share). On the
back of the fresh CBI status report, we see reason to apply a lower discount to our
fair value. We reduce the discount, which has been incorporated to take into account
investor fears/ apprehensions regarding ongoing investigations, to 20% from
30% earlier, and we raise our price target on Sun TV Network to Rs 391 (Rs 342
earlier). We upgrade the stock to BUY.
We caution investors that Sun TV remains a high-risk, high reward opportunity, and
the stock may be extremely volatile based on incoming news-flow on the investigations
that are underway. Weaker than expected advertising environment and loss of
competitive position remain the other key risks, although we believe risks related
with operations are well-contained due to strong grip of the company over
viewership in most markets, and the relatively concentrated status of industry in regional
markets.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
SUN TV NETWORK
PRICE: RS.303 RECOMMENDATION: BUY
TARGET PRICE: RS.391 FY12E P/E: 13.6X
In a status report submitted to the Supreme Court on Thursday, the CBI has reportedly
said that there is no evidence that Mr. Dayanidhi Maran used coercive tactics
to force Mr. C Sivasankaran to sell Aircel Ltd to Maxis Communications. However,
the agency's counsel has told the court that investigations would continue since
there was evidence to suggest that there was a deliberate delay in granting of license
to Aircel.
The issue is of importance to Sun TV Network stock. News of alleged wrong-doing
in the deal, coupled with Maxis' purchase of a stake in Sun Direct, the DTH entity
promoted by Mr. Kalanithi Maran (promoter of Sun TV), is behind the severe de-rating
that Sun TV has witnessed in the past eight months.
Although we are in no position to understand whether CBI shall eventually gather
enough evidence, we believe that the current news-flow is a positive for Sun TV, in
that CBI has no evidence as of now of alleged quid pro quo between Maxis and Mr.
Maran/ relatives'. As per media reports, the CBI is set to interrogate Mr. Dayanidhi
Maran and Mr. T. Ananda Krishnan, the promoter of Maxis, in the next fortnight.
The CBI status report is the first positive piece of news that Sun TV Network stock
has received in a fairly long time.
We have so far held the view that although Sun TV Network assets should be valued
aggressively, the overhang of investigations underway could have a negative impact
on the stock. The same was the key factor that motivated our downgrade (to ACCUMULATE)
on Sun TV Network. We believe the current news-flow is incrementally
positive for Sun TV Network.
The stock is trading at 13.6x PER FY12, at the lower end of its five year PER band.
Our prior price target, Rs 342, accounted for a 30% discount to fair value of Sun TV
Network (we see fair value of operations of the company at Rs 489/share). On the
back of the fresh CBI status report, we see reason to apply a lower discount to our
fair value. We reduce the discount, which has been incorporated to take into account
investor fears/ apprehensions regarding ongoing investigations, to 20% from
30% earlier, and we raise our price target on Sun TV Network to Rs 391 (Rs 342
earlier). We upgrade the stock to BUY.
We caution investors that Sun TV remains a high-risk, high reward opportunity, and
the stock may be extremely volatile based on incoming news-flow on the investigations
that are underway. Weaker than expected advertising environment and loss of
competitive position remain the other key risks, although we believe risks related
with operations are well-contained due to strong grip of the company over
viewership in most markets, and the relatively concentrated status of industry in regional
markets.
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