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UBS Investment Research
Hathway Cable & Datacom
Digitisation gets cabinet approval
[ EXTRACT]
Government has passed an ordinance to mandate digitisation
Based on our meetings with various media industry participants, we believe the
government was working on an ordinance to approve mandatory cable digitisation in
India. This received cabinet approval today. As per the timelines finalised by the
Ministry of Information Broadcasting (MIB), the whole of India is likely to switch to
digital signals by December 2014 in four phases.
We assume mandatory digitisation in our estimates from FY13 onwards
We forecast revenue will grow 12% and EBITDA 34% in FY13, led by Phase I of the
digitisation process. Hathway Cable & Datacom (Hathway) reaches 8.7m subscriber
homes, but it only gets paid for 1.8m. We assume: 1) 82% of the 8.7m homes will form
part of the Phase I and II implementation; 2) around 60% of the undeclared homes
would remain with Hathway after digitisation, with approximately 40% churning to
DTH; and 3) placement revenue will decline 70% to Rs1.35bn by FY16.
Hathway benefits from cable digitisation
We believe the recent government approval is a key catalyst for Hathway’s share price.
We think Hathway remains a long-term growth story and benefits from cable
digitisation in India. We estimate a worst-case value of Rs100/share based on
conservative assumptions, while our best-case estimate is Rs200/share. However,
execution remains key for a share price re-rating, in our view.
Valuation: maintain Buy; Rs130.00 price target
We value Hathway at 9x FY13E EV/EBITDA. While we maintain our Buy rating on
the company, we prefer Dish TV due to its better execution and earnings visibility.
Hathway Cable & Datacom
Hathway Cable & Datacom (Hathway) began operations in 1998. It is one of
India's leading cable multi-system operators with a pan-India presence. It
distributes cable TV on digital and analogue platforms, and provides broadband
services. Its cable services reaches 8.2m homes. It has a backend network of 71
analogue and 19 digital head-ends, and 15,000km of hybrid fibre-coaxial
network. The Rajan Raheja group holds a 50.6% stake in the company.
Statement of Risk
We believe the key risk for Hathway is poor execution. Other risks include
intense competition from DTH as well as regulatory risks. Placement costs could
decline to zero if there is complete digitisation.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Hathway Cable & Datacom
Digitisation gets cabinet approval
[ EXTRACT]
Government has passed an ordinance to mandate digitisation
Based on our meetings with various media industry participants, we believe the
government was working on an ordinance to approve mandatory cable digitisation in
India. This received cabinet approval today. As per the timelines finalised by the
Ministry of Information Broadcasting (MIB), the whole of India is likely to switch to
digital signals by December 2014 in four phases.
We assume mandatory digitisation in our estimates from FY13 onwards
We forecast revenue will grow 12% and EBITDA 34% in FY13, led by Phase I of the
digitisation process. Hathway Cable & Datacom (Hathway) reaches 8.7m subscriber
homes, but it only gets paid for 1.8m. We assume: 1) 82% of the 8.7m homes will form
part of the Phase I and II implementation; 2) around 60% of the undeclared homes
would remain with Hathway after digitisation, with approximately 40% churning to
DTH; and 3) placement revenue will decline 70% to Rs1.35bn by FY16.
Hathway benefits from cable digitisation
We believe the recent government approval is a key catalyst for Hathway’s share price.
We think Hathway remains a long-term growth story and benefits from cable
digitisation in India. We estimate a worst-case value of Rs100/share based on
conservative assumptions, while our best-case estimate is Rs200/share. However,
execution remains key for a share price re-rating, in our view.
Valuation: maintain Buy; Rs130.00 price target
We value Hathway at 9x FY13E EV/EBITDA. While we maintain our Buy rating on
the company, we prefer Dish TV due to its better execution and earnings visibility.
Hathway Cable & Datacom
Hathway Cable & Datacom (Hathway) began operations in 1998. It is one of
India's leading cable multi-system operators with a pan-India presence. It
distributes cable TV on digital and analogue platforms, and provides broadband
services. Its cable services reaches 8.2m homes. It has a backend network of 71
analogue and 19 digital head-ends, and 15,000km of hybrid fibre-coaxial
network. The Rajan Raheja group holds a 50.6% stake in the company.
Statement of Risk
We believe the key risk for Hathway is poor execution. Other risks include
intense competition from DTH as well as regulatory risks. Placement costs could
decline to zero if there is complete digitisation.
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