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2QFY12 Results
Zee Entertainment’s encouraging 23%YoY growth in domestic
subscriptions and 60% reduction in sports business loss led 2QFY12
results ahead of our estimates. Direct-to-home (DTH) collections are up
43%YoY and core business profitability (ex-sports) remains high.
Meanwhile government has made a renewed push for cable digitalisation
and management has reiterated that sports business loss will be
contained at Rs1bn in FY12. We remain BUYers, believing the company is
best placed to lever structural changes in DTH and cable distribution.
2QFY12 results ahead of expectations
Zee quarter revenues at Rs7.2bn, up reported 3%QoQ, were 2% ahead of
expectations led by a positive surprise in domestic subscriptions leading
profits at Rs1.56bn up 17%QoQ/24%YoY. Zee domestic subscriptions from
cable and DTH were up an estimated 23%YoY/3%QoQ adjusted for change in
accounting where now the same are included net of expenses post formation
of Media Pro (Star Zee distribution JV). Meanwhile Zee advertising revenues
were up 4%QoQ despite stiff competition, soft advertising environment and a
seasonally weak quarter while YoY comparisons are impacted by big India
centric cricket properties in 2QFY11. On profitability Zee Ebitda margins
improved to 29% and ex-sports these stand at 36.5%. Zee sports
revenues at Rs881m were flatQoQ and down 26%YoY while Ebitda
loss declined 60%YoY/QoQ to Rs226m.
Regulatory push for “Digitalisation” and DTH ramp-up
Recently the I&B Ministry has made a renewed push for “Digitalisation” with
an ordinance to amend the Cable TV Act to meet 31st March 2012 deadline
for digitalization in four metros. While the renewed regulatory push is a
positive the time deadlines are ambitious. Nevertheless with the ground
realities in broadcast distribution and rapid strides by DTH, cable digitalisation
is only inevitable. And Zee not only remains best placed to lever the structural
change in domestic/cable distribution but also from DTH. Industry DTH
subscribers have crossed 39m and we estimate Zee DTH collections were up
43%YoY. Cable revenue was up slower 6%YoY due to the rise of DTH and
ongoing government-mandated cable rate freeze since 2007, but this is due
for a reset in future alongside digitalisation.
Slip in Zee TV viewership ratings, yet maintain BUY.
Flagship channel Zee TV viewership ratings have slipped following an
onslaught of star-studded mega reality shows by competitors, in particular
Sony TV’s KBC Season 5. However management has renewed content
efforts and Zee TV has inherent strengths in being part of an unmatched
bouquet of +20 channels and the decline in flagship channel viewership will
also likely reverse when KBC on Sony TV goes off air mid next month.
Meanwhile Zee has Rs12bn in cash and company Rs7bn share buyback at
Rs126 is ongoing. We see the current decline in stock price as an opportunity
and remain BUYers, of Zee believing the company is best placed to lever
structural changes in DTH and cable distribution.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
2QFY12 Results
Zee Entertainment’s encouraging 23%YoY growth in domestic
subscriptions and 60% reduction in sports business loss led 2QFY12
results ahead of our estimates. Direct-to-home (DTH) collections are up
43%YoY and core business profitability (ex-sports) remains high.
Meanwhile government has made a renewed push for cable digitalisation
and management has reiterated that sports business loss will be
contained at Rs1bn in FY12. We remain BUYers, believing the company is
best placed to lever structural changes in DTH and cable distribution.
2QFY12 results ahead of expectations
Zee quarter revenues at Rs7.2bn, up reported 3%QoQ, were 2% ahead of
expectations led by a positive surprise in domestic subscriptions leading
profits at Rs1.56bn up 17%QoQ/24%YoY. Zee domestic subscriptions from
cable and DTH were up an estimated 23%YoY/3%QoQ adjusted for change in
accounting where now the same are included net of expenses post formation
of Media Pro (Star Zee distribution JV). Meanwhile Zee advertising revenues
were up 4%QoQ despite stiff competition, soft advertising environment and a
seasonally weak quarter while YoY comparisons are impacted by big India
centric cricket properties in 2QFY11. On profitability Zee Ebitda margins
improved to 29% and ex-sports these stand at 36.5%. Zee sports
revenues at Rs881m were flatQoQ and down 26%YoY while Ebitda
loss declined 60%YoY/QoQ to Rs226m.
Regulatory push for “Digitalisation” and DTH ramp-up
Recently the I&B Ministry has made a renewed push for “Digitalisation” with
an ordinance to amend the Cable TV Act to meet 31st March 2012 deadline
for digitalization in four metros. While the renewed regulatory push is a
positive the time deadlines are ambitious. Nevertheless with the ground
realities in broadcast distribution and rapid strides by DTH, cable digitalisation
is only inevitable. And Zee not only remains best placed to lever the structural
change in domestic/cable distribution but also from DTH. Industry DTH
subscribers have crossed 39m and we estimate Zee DTH collections were up
43%YoY. Cable revenue was up slower 6%YoY due to the rise of DTH and
ongoing government-mandated cable rate freeze since 2007, but this is due
for a reset in future alongside digitalisation.
Slip in Zee TV viewership ratings, yet maintain BUY.
Flagship channel Zee TV viewership ratings have slipped following an
onslaught of star-studded mega reality shows by competitors, in particular
Sony TV’s KBC Season 5. However management has renewed content
efforts and Zee TV has inherent strengths in being part of an unmatched
bouquet of +20 channels and the decline in flagship channel viewership will
also likely reverse when KBC on Sony TV goes off air mid next month.
Meanwhile Zee has Rs12bn in cash and company Rs7bn share buyback at
Rs126 is ongoing. We see the current decline in stock price as an opportunity
and remain BUYers, of Zee believing the company is best placed to lever
structural changes in DTH and cable distribution.
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