TV 18

Message

THIS THREAD WAS STARTED BEFORE TV18 WAS DEMERGED INTO TV18 AND NETWORK 18

TV 18 (CMP Rs 571) has been one of my best all time picks. This is also a case of what Lynch said “Buy what you see”. The story for now runs deeper then that. There are multiple triggers that the market is failing to recognize at this point in time. 

Analysts today behave like accountants. They refuse to estimate and generally rely on companies to provide guidance. With this kind of an approach investors will only make market returns. There are multiple analyst reports refusing to take into account any of the profits from TV18’s  new venture since the company did not give them any figures.Now the multiple triggers that this stock could see are:

1) Raghav Bahl the promoter had declared last year that Awwaz’s revenue in some time would exceed the revenues of CNBC TV-18. The total viewrship of Awwaz is already on par with that of TV 18 and as per Raghav’s statement the total revenues from Awwaz should soon overtake the English news channel’s revenue- Analysts have not made any provision for revenues from this channel. 

2) No provision has been made for any revenues from CNN-IBN the English flagship channel. The latest TAM ratings show that CNN-IBN is ahead of NDTV 24/7 in all the time slots. If the market values NDTV’s 3 channels at Rs 1000 crores market cap the value of the English Channel 24/7 should at least be half of that. A lion’s share of NDTV’s revenue is derived from this English Channel.

3) Channel 7 a company in which the TV 18 group holds 50% stake also does not find any mention in the analyst’s reports.

The Research houses argue that in the absence of the company giving any guidance on these channels they would not be able to account for any of the revenues that might accrue from these ventures.

Now we can come to the most interesting part – the Group’s internet business. In fy 06 The revenues from internet and related software businesses for TV 18 group as a whole was Rs 11.13 crores out of the total revenues for Rs 152.04 crores. Almost half (Rs 6.03 crores) of the internet revenues had come in the period Jan – Mar 06.

Moneycontrol has already been ranking amongst the top 1000 websites in the world and amongst the financial websites is ranked only behind the wallstreetjournal.com. The market will now have to quickly adjust to the rise of ibnlive.com into the top 2500 websites in the world. This has happened within 7 months of its launch.

The other growing internet businesses that TV 18 posses are yatra.in (finance partners ADA and Pramode Haque), commoditiescontrol.com (the commodity website of the company which has already tied up with corporate users) and a home shopping network which is yet to be launched.

At the NASDAQ internet companies are valued at 10 to 20 times market cap to sales. We cannot do an EPS analysis of TV – 18’s internet properties since the data is insufficient and therefore stick to a market cap to sales study. The company has already decided to transfer its internet businesses  into a wholly owed subsidiary to provide focus to these ventures.

Company

Market Cap 

Price/Sales TTM

Forward PE

Google

US $120.93bn

17.12

31.59

Yahoo

US $ 35.5bn

8.04

35.49

Rediff

US $ 338.46mn

17.02

40.08

                                                                                Source yahoo finance

Of late there has been tremendous growth in the broadband services in India. Coupled with the high growth rate in PC sales internet properties can only be valuable. My sense is that by Fy 08 the internet ventures should have a top line of at least Rs 100 crores. Growth would come from increasing penetration of existing networks and also from the launch of new sites. If we value the same on a Market cap to Sales ratio of 12 times - 30% discount to the top companies at NASDAQ these ventures should be valued at Rs 1200 crores only. On an expanded restructured total equity of 2.6 crore shares they amount for Rs 460 per share. With the cash that the company holds and the proposed cash that is being raised by the promoters’ relinquishment of 10% equity the other businesses of the company are available for free!!!

No wonder the top management says that internet properties “can create tremendous value”

As I write this there is a news flash about the Govt. finally notifying CAS and once that happens TV-18 will be further benefited. This is so because last mile operators rampantly under declare the actual number of cable TV subscribers to the broadcasters. It is estimated that only 15% of the actual subscription is pocketed by broadcaster- the rest is kept by the distributors since there is no monitoring authority. 

Edited by basant - 20/Mar/2007 at 6:45pm

Result Synopsis:

· TV18** posts 55% Revenue growth; Net Profit up 65%

· Q1 Revenues at Rs. 416.07 mn, Up 55% YOY

· Operating Profit at Rs. 213.76 mn, Up 57% YOY

· Operating Margin maintained above 50%

· Net Profit at Rs. 138.21 mn, Up 65% YOY

· EPS at Rs 6.57but after deducting for ESOPs the EPS is Rs 5.59)

Highlights:

Internet Ventures Highlights: