TV Today - A Case of Ridiculous Valuations
TV Today reported its Q2 results today, while its topline stood at 41.86 crores, the PAT was 3.28 crores (operating profit was 9.79 crores). At first look, nothing great about the results. However, compare these results with NDTV, whose consolidated Q2 topline was 54.51 crores, operating loss 14.60 crores, and net loss 3.62 crores, TVTN's Q2 results were certainly impressive.
Present Business:
AajTak still retains the No. 1 position, and combined with Tez commands a 30% market share in the Hindi news genre. IBN-7 may be able to displace StarNews and NDTV India, but even their top guy admits it's impossible to displace AajTak from its No. 1 position. The English sibling Headlines Today which earlier lost its market share to CNN-IBN is finally doing well with the management taking positive steps on making it a stand-alone entity rather than a cheap carbon-copy of AajTak. Seems like Aroon Purie finally learnt that HT will do well only if the content differs from AajTak, and is akin to NDTV 24x7 or CNN-IBN. The market share of HT in the English news genre currently stands at 10%.
The regional channel for the Delhi NCR region, Dilli AajTak has captured a fair size of the market since its launch. Interestingly, the Delhi Ad market stands at 300-400 crores, of which Radio gets 80 crores. Given Aroon strong Delhi roots, this channel can command ever better revenues than its parent in the coming months.
Ad Pie:
Frederick Forsyth in his novel "The Fist of God" referred to the importance of human intelligence over electronic survelliance i.e. ground facts are more important than what analysts say. I've been watching AajTak, HT and Tez for years now, and never before have I seen so many ads on these channels, as from Oct. 1st '06.
On a YOY basis, HT easily gets over 150% ads on YoY basis, Tez gets over 2000% more ads, while AajTak is sitting pretty with 50% more ads. This may be due to the combined rate card for 3 channels for the advertisers, but this rate card commands a very decent premium. The earlier 10-second ad slot has been increased to over 20-30 from the previous 10-15. Furthermore, there are ad breaks after each 6-7 mins, from the earlier 13-14 mins.
Future:
Given the current ad status, TVTN should be able to report a Q3 topline of around 55 crores with a PAT of 12 crores, and a Q4 topline of over 60 crores with a PAT of 15 crores. Compared with its peers (TV18 and NDTV), TVTN holds the largest reserves in excess of 200 crores with virtually nil debts.
Unlike the earlier English venture HT, the management is seriously laying good groundwork for its Business Channel a tie-up with Bloomberg. Though TVTN's CS says the news is speculative of nature, there are reliable sources which confirm
this news (http://www.indiantelevision.com/headlines/y2k6/july/july315.htm).
Ridiculous Valuations:
4+1 channels (AajTak, HT, Tez, Dilli AajTak) + (soon-to-be-launched Business Channel), Reserves over 200 crores, Topline around 200 crores. For a niche media company which has 35-40 million weekly viewers and was voted the most trusted and most important news source of India by BBC/Reuters/Media Center Poll (http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/02_05_06mediatrust.pdf), the stock market gives it a very, very, very unkind valuation of 440 crores. I agree TV18 and NDTV are fantastic companies, but they deserve a premium of 50-75% over TVTN (a similar difference between Deccan Chronicle and Jagran). TVTN thus deserves to trade at a market cap of 750-800 crores i.e. it should be priced at 129-137 Rs.
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