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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.kotaksecurities.com/pdf/dmb/MorningInsight03042012.pdf
JAGRAN PRAKASHAN
PRICE: RS.100 RECOMMENDATION: BUY
TARGET PRICE: RS.136 FY13E P/E: 12.6X
Jagran Prakashan has announced the acquisition of Naidunia Media. The cost
of acquisition, Rs 1.5Bn net of tax benefits to Jagran Prakashan, is
reasonable. We expect negative impact of the transaction to the extent of
6.5% on PBT in FY13; which would be more than offset via tax benefits
arising from the transaction. Over the long-term, we believe the acquisition
shall be neutral on EPS. Valuations paid are reasonable, the acquisition has
some merit and we believe shall be a positive over the longer-term,
provided Jagran Prakashan can overcome competitive pressures to be#2/
strong #3 in the relevant markets. We maintain our BUY rating on Jagran
Prakashan.
Acquisition of Suvi (Nai Dunia); entry in Madhya Pradesh/ Chhattisgarh
markets: Jagran Prakashan has announced the acquisition of Suvi Info, the holding company for Naidunia Media. The said entity owns seven editions of newspapers Nai Dunia/ Nav Dunia in the MP/ Chhattisgarh territories. Naidunia had
revenues of Rs 1Bn in FY11, and EBITDA losses for the year amounted to ~Rs
250mn.
Transaction to cost Jagran Rs 1.5Bn, all-cash transaction: Jagran Prakashan
has paid a consideration of Rs 2.25Bn for the acquisition. Netting off the tax
benefits amounting to Rs 750mn that shall accrue to Jagran as a result of the
transaction, the acquisition has cost Jagran Rs 1.5Bn. The acquisition shall be an
all-cash transaction, and will involve an outgo of less than Rs 1.5Bn cash, as per
management.
Entry into new markets is positive, competitive concerns exist: The key
positive of the transaction is a relatively low-investment entry in the MP/
Chhattisgarh market for Jagran Prakashan, while the negative relates with the
heightened state of competition in the two markets, after an aggressive entry by
Patrika. Although the opportunity size is fairly large (Rs 5.5Bn in MP/
Chhattisgarh print market), Nai Dunia will be competing in a 3-player market in
MP, and a four player market in Chhattisgarh. Profitability is likely to stay under
pressure for at least two years.
Expect negative impact on PBT in FY13/ FY14: Excluding the tax benefits
from losses carried forward, the acquisition shall impact Jagran Prakashan FY13
EPS negatively to the tune of Rs 0.6/ share, or a decline of 6.5% on PBT. Assuming that Jagran shall pay MAT in FY13, EPS shall come in at Rs 9.0, 11% ahead
of our current estimates. We believe that Jagran shall be able to improve the
company's performance steadily going forward, and expect long-term impact of
the acquisition to be EPS neutral FY15 onward (steady state EBIDTA margin of
12-15%).
Valuations paid are reasonable, success may add value: Working with Rs
1.5Bn as the cost of the acquisition, Jagran Prakashan has paid 1.5x EV/ FY11
sales, and Rs 830 EV/ reader, at a sharp discount to Jagran's and DB Corp valuations, and in line with cheaper peer Hindustan Media Ventures. We believe the
valuation paid is justified, and provides Jagran a fair opportunity to create value.
We see the acquisition as a mild positive for the stock in the immediate term.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.kotaksecurities.com/pdf/dmb/MorningInsight03042012.pdf
JAGRAN PRAKASHAN
PRICE: RS.100 RECOMMENDATION: BUY
TARGET PRICE: RS.136 FY13E P/E: 12.6X
Jagran Prakashan has announced the acquisition of Naidunia Media. The cost
of acquisition, Rs 1.5Bn net of tax benefits to Jagran Prakashan, is
reasonable. We expect negative impact of the transaction to the extent of
6.5% on PBT in FY13; which would be more than offset via tax benefits
arising from the transaction. Over the long-term, we believe the acquisition
shall be neutral on EPS. Valuations paid are reasonable, the acquisition has
some merit and we believe shall be a positive over the longer-term,
provided Jagran Prakashan can overcome competitive pressures to be#2/
strong #3 in the relevant markets. We maintain our BUY rating on Jagran
Prakashan.
Acquisition of Suvi (Nai Dunia); entry in Madhya Pradesh/ Chhattisgarh
markets: Jagran Prakashan has announced the acquisition of Suvi Info, the holding company for Naidunia Media. The said entity owns seven editions of newspapers Nai Dunia/ Nav Dunia in the MP/ Chhattisgarh territories. Naidunia had
revenues of Rs 1Bn in FY11, and EBITDA losses for the year amounted to ~Rs
250mn.
Transaction to cost Jagran Rs 1.5Bn, all-cash transaction: Jagran Prakashan
has paid a consideration of Rs 2.25Bn for the acquisition. Netting off the tax
benefits amounting to Rs 750mn that shall accrue to Jagran as a result of the
transaction, the acquisition has cost Jagran Rs 1.5Bn. The acquisition shall be an
all-cash transaction, and will involve an outgo of less than Rs 1.5Bn cash, as per
management.
Entry into new markets is positive, competitive concerns exist: The key
positive of the transaction is a relatively low-investment entry in the MP/
Chhattisgarh market for Jagran Prakashan, while the negative relates with the
heightened state of competition in the two markets, after an aggressive entry by
Patrika. Although the opportunity size is fairly large (Rs 5.5Bn in MP/
Chhattisgarh print market), Nai Dunia will be competing in a 3-player market in
MP, and a four player market in Chhattisgarh. Profitability is likely to stay under
pressure for at least two years.
Expect negative impact on PBT in FY13/ FY14: Excluding the tax benefits
from losses carried forward, the acquisition shall impact Jagran Prakashan FY13
EPS negatively to the tune of Rs 0.6/ share, or a decline of 6.5% on PBT. Assuming that Jagran shall pay MAT in FY13, EPS shall come in at Rs 9.0, 11% ahead
of our current estimates. We believe that Jagran shall be able to improve the
company's performance steadily going forward, and expect long-term impact of
the acquisition to be EPS neutral FY15 onward (steady state EBIDTA margin of
12-15%).
Valuations paid are reasonable, success may add value: Working with Rs
1.5Bn as the cost of the acquisition, Jagran Prakashan has paid 1.5x EV/ FY11
sales, and Rs 830 EV/ reader, at a sharp discount to Jagran's and DB Corp valuations, and in line with cheaper peer Hindustan Media Ventures. We believe the
valuation paid is justified, and provides Jagran a fair opportunity to create value.
We see the acquisition as a mild positive for the stock in the immediate term.
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