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  • Dish TV, Hathway move to ‘overweight’: Morgan Stanley

    Dish TV, Hathway move to ‘overweight’: Morgan Stanley

    MUMBAI: Brokerage firm Morgan Stanley has some good news in store for direct to home (DTH) player Dish TV and multi system operator (MSO) Hathway Cable & Datacom. The firm has upgraded both Hathway and Dish TV to ‘overweight’, while also raising their target price, that represents an upside of 37 per cent and 20 per cent respectively, over the next 12 months.

     

    As per an Economic Times report, Morgan Stanley has downgraded Zee Entertainment to ‘equal weight’ with downside of 10 per cent. “Zee outperformed Hathway and Dish by 12 per cent and 24 per cent, respectively, in 2014 as they believe that a large part of the potential improvement in subscriptions for Zee is in the price,” said the report. 

     

    While upgrading Dish TV from ‘underweight’ to ‘overweight’, the target price of the DTH platform has been raised from Rs 49 to Rs 82. Not only this, Hathway has been upgraded from ‘equalweight’ to ‘overweight’, with a current target price of Rs 91 from Rs 59.   

     

    According to the brokerage firm, there is a sense of urgency on monetisation by the MSOs, which can push up realisations for both Hathway and Dish TV.

     

    “MSOs were unable to effect any sizeable improvements in realisations in 2014. However, the push from broadcasters to improve their subscription share has forced MSOs’ hands,” added the media report.

     

    As per Morgan Stanley channel checks, MSOs are responding by introducing higher value packs, raising prices and moving to a prepaid model.

     

    The firm expects these efforts to boost realisations for MSOs and create headroom for Average Revenue Per User (ARPU) expansion for DTH. 

     

    While an improving macro-economic outlook can help lift TV ad spending, margins could remain muted in F2016 for Zee due to new launches. Hence, Morgan Stanley prefers Hathway Cable followed by Dish TV and then Zee Entertainment Ltd.

     

  • HSBC raises Hathway’s target price to Rs 432

    HSBC raises Hathway’s target price to Rs 432

    MUMBAI: HSBC Securities and Capital Markets’ latest report on multi system operator (MSO) Hathway Cable & Datacom has improved its rating from ‘normal’ to ‘overweight’.

     

    While it continues to value Hathway using a DCF based approach, it has raised the target price from Rs 276 to Rs 432. This is on the assumption of 12.5 per cent WACC, cost of equity of 13.5 per cent and cost of debt of 11 per cent.

     

    One of the main reasons for this is the expectation of increase in Average Revenue Per User (ARPU). HSBC expects gross billing to increase in phase I markets by around 15 per cent and phase II by around 10 per cent over the next two quarters. Gross ARPU is estimated to grow at 16 per cent CAGR from its earlier 8 per cent.

     

    Increase in ARPU would mean a near 10 to 20 per cent rise in cost, despite the incentives that are being offered by Star’s new RIO deals. The report also says that moving to prepaid would be necessary, even if it is restricted to Star  channels for now as in the long run it would allow MSOs to scale up to full prepaid gradually over the next 18-24 months.

     

    “LMOs will need to move to a prepay backend. Both these factors are positive for the sector and in our view build a long-term case for ARPU improvement, fewer bad debts, reducing friction between MSO and LMO relations, improving the industry structure and allowing the industry to benefit from sector consolidation,” it states.

     

    The report also highlights that if Star is successful in reaping benefits out of its new RIO policy, other big networks may follow suit, though not in the immediate 12 months.

     

    This apart, HSBC also sees broadband ARPUs increasing with a more robust DOCSIS 3.0 platform but with a slight concern on the slow pace of subscriber net addition. The delay in digitisation is positive for cable TV industry to consolidate market share in the first two phases. Side by side, issues such as revenue share and prepaid billing can be sorted and easily applied in phases III and IV.

     

    HSBC has raised its medium- term EBITDA estimates by 11 per cent (FY16e-21e CAGR of 13.5 per cent), cable TV ARPU assumptions by 12 per cent (FY16e-21e CAGR of 11 per cent) and broadband ARPU by 8 per cent for the same period.