MUMBAI: Zee Telefilms continued its upward rise on the Indian stock markets, edging up 0.78 per cent to Rs 103.75 on the Bombay Stock Exchange (BSE). The scrip witnessed volumes of 2,702,537 and touched a high of Rs 104.05. On the NSE, the scrip rose by 1.07 per cent and finished the day at Rs 104.05 with volumes of 4,385,079.
Zee CMD Subhash Chandra, who is currently actively managing the affairs of the company, seems to know exactly what kind of a fare will be lapped by the stock market operators, if not the audiences. The markets seem to be gung-ho about Zee’s forthcoming mix for the next quarter that includes a prize money of Rs 1.21 billion under the Mahalotto Megawin contest.
Zee, in association with E-Cool Gaming Solutions had announced its MEGA contest that would enable its viewers to win Rs 1.21 billion within three months starting 5 January 2003. Zee will be giving its audience an opportunity to win free prizes worth Rs 10 million every day and Rs 40 million on Sundays in addition to the Rs 5 million for a “Dekho Dhoom” contest.
The other triggers for increased interest in the stock seem to be linked to the impending announcement of good quarterly results; hike in subscription rates; its possible entry into the expanded list of scrips in the derivatives segment; successful revamping of the company’s flagship television channel – Zee TV – that has boosted the TRP ratings of the channel’s programmes in the last quarter.
On 7 January 2002, Zee witnessed active trading on an otherwise dull trading day. The FIIs and institutional funds conducted sustained buying and more than 3.77 million shares were traded. Since 24 December, the scrip has grown 7.4 per cent from Rs 96.60.
SSKI vice president research Nirav Sheth states: “The recent initiatives such as the cross-promotions with Playwin online lotteries that have been announced by Zee seem to be having an impact on market sentiments. The strategy might probably work well to counter the threat of World Cup. However, it is not necessary that the positive rub-off might spillover to the other programmes. Post World Cup, the programming will need to be beefed up and Zee’s team needs to work on the same.”
Motilal Oswal Securities media analyst Subhabrata Majumder states: “The market sentiments seem to have improved due to the good results expected in the December 02 quarter. Our estimates indicate an 18.6 per cent – the highest y-o-y growth that Zee has achieved in the last seven quarters. Our estimates also indicate a 40 per cent PAT growth. Both these figures are pretty good not just in the media sector but also in the corporate sector.
The growth is not driven merely by subscription revenues but ad revenues are also expected to rise to Rs 1.92 billion as compared to Rs 1.72 billion from from DQ 2001.”
“There is also an imminent announcement about the inclusion of Zee (the only media scrip) in the derivatives futures and options trading. The recent buying by institutional funds is an indication that they seem to be interested in Zee’s cross-promotional strategy with Megawin online lotteries. The Mahalotto prize money of Rs 1.21 billion (Rs 10 million a week and Rs 40 million plus on Sundays) seem to have been a positive trigger,” Shubham adds.
Another financial analyst said that Zee’s entry into the Top 100 viewership ratings list in the last quarter augurs well for the quarterly financial results due for announcement. The mega-prizes announced for the Megawin promotional scheme is an interesting ploy, according to him.
Others, however, don’t seem so optimistic. Kotak Mahindra’s media analyst Sanjeev Prasad states: “Zee TV had several programmes in the Top 100 viewership ratings list. The movie strategy seems to have worked but there is a feeling that it might not be that big an idea in the long run. The fundamentals will improve only if the Zee team realise that viewers watch TV for content and not for contests. As per our analysis, Rs 100 seems to be a fair value.”
A Kotak Mahindra report dated 13 December had stated that Zee would ultimately benefit from CAS as underdeclaration disappears. However, in the near term CAS may force Zee to reduce subscription fees and focus channels on subscription or advertising but not both.
The report estimated that Rs100 price was the target price for Zee and this rationale was based on DCF and free cash multiples. It had also mentioned that Zee needed a clear-cut strategy to counter the World Cup.
It is worth mentioing that the media and entertainment sector stocks had ended the calendar year on a high note. The market sentiments had improved due to varied reasons such as the expectations of a good financial results; and indications that Zee will be raising US$ 40 million loan via an overseas corporate body (OCB).
Towards the end of the year, the Zee counter showed hectic activity due to a report in The Hindu Business Line . The report stated that the Subhash Chandra group had finalised plans to pledge equity shares of Zee Telefilms Ltd with the Zurich-based Credit Suisse First Boston Corporation (CSFBC) for a three-year term loan of $40 million.
The report mentioned that Delgrada Ltd, a Mauritius-based OCB owned by Chandra, would pledge 50 million equity shares of Zee Telefilms, having a face value of Re 1 each, with Credit Suisse First Boston, Singapore, a wholly-owned subsidiary of the Zurich-based global banking and insurance giant.
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Tag: Subhabrata Majumder
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Bourses welcome Zee’s mega-prizes strategy
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Motilal Oswal report says CAS unlikely to impact Zee Telefilms till 3FY04
MUMBAI:The Motilal Oswal Inquire Indian Equity Research (MOSt Inquire) report dated 20 December 2002 has stated that CAS is unlikely to have any financial impact on Zee Telefilms before 3QFY04 as the first phase would only get completed by December 2003.
Speaking to indiantelevision.com, Motilal Oswal Securities’ Subhabrata Majumder elaborated, “The passage of CAS in the Rajya Sabha will ensure that the longer term impact would be favorable to Zee Telefilms. We have maintained our FY04 estimates and Buy recommendation.”
The reasons, Motilal Oswal gives for not changing its position on the Zee stock include:Ø Zee’s higher rural bias compared to competitors protects it from any adverse impact on advertising revenues due to possibly low set top box penetration in the metros.
Ø It is possible that the set top box penetration might show a substantial increase and surprise the sceptics.Ø Broadcasters could float a mass general entertainment free-to-air channel to enhance their advertising revenues and to give viewers a laddering option to graduate to their respective pay offerings. (Zee may actually take this route by having a free to air, second run programming channel.)
Ø Zee is a broadbased player with the viewership of its flagship channel, Zee TV having a higher rural bias than its competitors. The regional language Alpha channels also give it a broader revenue base from the non-metro cities and towns. Therefore, for Zee, the implied share of advertising revenues from the metros would not be more than 20 percent.
In the longer term, with improving penetration of set top boxes, Zee could derive higher pay revenue grow the post-CAS. We maintain our advertising and pay revenue estimates for FY04, till the time the final guidelines are out and reiterate our Buy recommendation. -
MOSt Inquire maintains “Buy” tag on Zee Telefilms
MUMBAI: Motilal Oswal Securities Inquire (MOSt Inquire) Indian Equity Research’s update on Zee Telefilms maintained its ‘Buy’ recommendation as the stock quoted at 16.6xFY03E (Rs 102 as on 10 December 2002) and 12.5x04FY04E earnings.
Speaking to indiantelevision.com, Subhabrata Majumder of Motilal Oswal Securities stated, “The takeover of operations by the promoter Subhash Chandra and his forthcoming appointment as the managing director has ushered in a phase wherein several changes are being initiated in every area of operation. Post CAS, the business and the revenue profile is also changing for the better with higher reliance on the stable pay revenues in the domestic and international arena.”
Majumder also added, “It is a good sign that Zee is also exercising caution and restraint in the new programming acquisitions (non-film based programmes) other than the high-cost films slated for the Thursday night premier slots. In fact, the effective cost for the Zee Network has not been affected to the fact that the channel has been interspersing the new programmes with the recycled ones from his archives.”
“However, the scrip had a heady run on the stock market since September 2001. From the Rs 80-90 levels, it increased to Rs 180-190 before settling down at the current level of around Rs 100. However, in the post-CAS scenario, the intrinsic value of the scrip should have placed it at about Rs 135,” Majumder stated.
The MOSt Inquire report also states that there would be no adverse implication for Zee Telefilms due to the riders attached to recent revision of Star’s bouquet rates. The report claims that the Star move cleared the decks for an upward revision of the Zee-Turner bouquet. Subsequently, Zee has taken the plunge and announced what is clearly a significant hike in its package price from Rs 42 to Rs 50 for the complete bouquet of 16 channels, effective 1 January 2003. The report states that this move will grow Zee’s paid subscriber base apart and help it to grow in value and volume terms.
Majumder added, “The recent trends indicate that the ratio of subscription revenues to advertising revenues is undergoing a shift. In FY01, the advertising revenues and subscription revenues were 70.8 percent and 20.8 percent respectively. By FY03, the advertising revenues and subscription revenues will be 56.4 percent (estimated) and 40.1 percent (estimated) respectively. The EBITDA as a percentage of the net sales has also gone up from 25.6 percent in FY01 to 33.5 percent in FY03 (estimated).”
The MOSt Inquire report also stated that the inclusion of new channels in the Zee-Turner bouquet will make the Zee offering more attractive vis-à-vis the competitive bouquets. The Zee-Turner bouquet will have a variety of channels and genres. However, the Zee-Turner bouquet doesn’t have any sports channel or infotainment/educational channel.
The report also estimates that Zee’s domestic pay revenues would grow to Rs 2.4 billion in FY04, a growth of 52 percent over the firm’s FY03 estimate of Rs1.6 billion. With this, the share of subscription revenues to total revenues would increase to 40% in FY03 and to 44% in FY04.
The report also stated that the flagship channel Zee TV’s share in ad revenues as well as total revenues had been witnessing a sharp decline in recent times. This was likely to bring down the concentration risk in Zee’s revenue-mix.