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UBS Investment Research
Zee Entertainment Enterprises Ltd
Maintain long-term positive view
[ EXTRACT]
Zee TV’s ratings remain under pressure
Zee’s flagship channel (Zee TV) has shown a decline in its viewership (GRP) and ranking
over the past eight weeks (from No. 3 to No. 4). This could negatively impact its
advertising revenue in the near term. While Zee TV has recently started a new reality
show (Star Ya Rockstar), we believe it needs to invest in additional programming to
regain its No. 3 position. We expect the GRP gap between Sony (currently No. 3) and Zee
TV to narrow once the former’s show Kaun Banega Crorepati (KBC) ends.
We lower our FY12/13 ad revenue forecasts
Based on our discussion with media participants, advertising revenue seems to have
picked up for Zee in October, ahead of Diwali. However, we believe advertising could
come under pressure after November given Zee TV’s No. 4 ranking. We conservatively
lower our FY12 advertising revenue growth forecast from 5% to 0% and for FY13 from
15% to 12%.
Weak Q2 results could provide an attractive buying opportunity
We expect Q2 results to be weak, which could provide an attractive buying
opportunity. We maintain a positive view as Zee should benefit from mandatory
digitisation. We think the distribution JV with Star could be positive for Zee and should
contribute to subscription revenue growth starting in FY13. Zee has a healthy balance
sheet with Rs14bn in cash (at end-Q1) and we estimate a strong FY12 FCF yield of 4%.
We believe there is limited share price downside as Zee will buy back Rs7bn in shares
at under Rs126/share (12m shares bought so far).
Valuation: maintain Buy, lower price target from Rs160.00 to Rs145.00
We derive our price target from a DCF-based methodology and explicitly forecast longterm
valuation drivers using UBS’s VCAM tool, assuming a 12.3% WACC.
Zee Entertainment Enterprises Ltd
Zee Entertainment Enterprises (Zee) is a cable and satellite channel operator
with Hindi language and regional language programming. The relaunch of Star
as a Hindi language network in July 2000 raised competitive pressure in the
domestic broadcasting business. Zee is building up pay revenue as a second
driver of its earnings growth, as advertising revenue is faltering because of weak
advertising spend by companies and Zee's low audience share. Zee was the first
to launch a direct-to-home service in India.
Statement of Risk
We believe Zee faces multiple risks in its content and broadcasting business in
terms of the success or failure of its programming. It also faces intense
competition from other networks, which could impact its viewership ratings and
advertising revenue.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Zee Entertainment Enterprises Ltd
Maintain long-term positive view
[ EXTRACT]
Zee TV’s ratings remain under pressure
Zee’s flagship channel (Zee TV) has shown a decline in its viewership (GRP) and ranking
over the past eight weeks (from No. 3 to No. 4). This could negatively impact its
advertising revenue in the near term. While Zee TV has recently started a new reality
show (Star Ya Rockstar), we believe it needs to invest in additional programming to
regain its No. 3 position. We expect the GRP gap between Sony (currently No. 3) and Zee
TV to narrow once the former’s show Kaun Banega Crorepati (KBC) ends.
We lower our FY12/13 ad revenue forecasts
Based on our discussion with media participants, advertising revenue seems to have
picked up for Zee in October, ahead of Diwali. However, we believe advertising could
come under pressure after November given Zee TV’s No. 4 ranking. We conservatively
lower our FY12 advertising revenue growth forecast from 5% to 0% and for FY13 from
15% to 12%.
Weak Q2 results could provide an attractive buying opportunity
We expect Q2 results to be weak, which could provide an attractive buying
opportunity. We maintain a positive view as Zee should benefit from mandatory
digitisation. We think the distribution JV with Star could be positive for Zee and should
contribute to subscription revenue growth starting in FY13. Zee has a healthy balance
sheet with Rs14bn in cash (at end-Q1) and we estimate a strong FY12 FCF yield of 4%.
We believe there is limited share price downside as Zee will buy back Rs7bn in shares
at under Rs126/share (12m shares bought so far).
Valuation: maintain Buy, lower price target from Rs160.00 to Rs145.00
We derive our price target from a DCF-based methodology and explicitly forecast longterm
valuation drivers using UBS’s VCAM tool, assuming a 12.3% WACC.
Zee Entertainment Enterprises Ltd
Zee Entertainment Enterprises (Zee) is a cable and satellite channel operator
with Hindi language and regional language programming. The relaunch of Star
as a Hindi language network in July 2000 raised competitive pressure in the
domestic broadcasting business. Zee is building up pay revenue as a second
driver of its earnings growth, as advertising revenue is faltering because of weak
advertising spend by companies and Zee's low audience share. Zee was the first
to launch a direct-to-home service in India.
Statement of Risk
We believe Zee faces multiple risks in its content and broadcasting business in
terms of the success or failure of its programming. It also faces intense
competition from other networks, which could impact its viewership ratings and
advertising revenue.
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