HT MEDIA
PRICE: RS.136 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.153 FY11E EV/EBITDA: 9X; P/E: 16X
q HT Media demerges its Hindi business into a 99.3% owned subsidiary;
consideration being the book value of Rs.1.49bn.
q Action aimed at bringing greater managerial focus and possibly aimed
at securing independent funding for the faster growing regional press
business.
q Expect advertising growth rates to pick up starting 2HFY10, as macro
environment picks up. Urban consumption/advertising pick up becomes
more important given HT's dependence on national media markets in its
English business.
q Progress of new investments (internet and radio) that have been a drag
on consolidated financials will be the key variable to monitor
q Maintain rating; any stock weakness can be used to ACCUMULATE as a
revival in national advertising markets, low NP prices and potential of
regional business (Hindustan) could lead to incremental earnings gains.
Price target is unchanged at Rs.153.
q Belied hopes of a recovery in corporate earnings and/or higher NP prices
remain key risks.
HT Media demerges 'Hindi business' into a subsidiary company
n HT Media has approved the sale/transfer of its "Hindi Business Undertaking" to
Hindustan Media Ventures Limited, a subsidiary company, of which 99.3% is
owned by the listed company- HTML. The transaction shall be effective from
December 1, 2009, according to the company.
n As part of this transaction, the 'Hindi business' of HTML comprising of
'Hindustan', the Hindi daily; Hindi magazines, 'Nandan' & 'Kadambini', and the
internet portals of these publications, including all assets, liabilities and
employees pertaining to this business, will be transferred to Hindustan Media
Ventures Limited on a 'slump sale' and 'going concern' basis, as per a company
release.
n In financial terms the 'Hindi' business has grown quickly for HT Media over the
last two years, and contributed close to 28% of Q2FY10 standalone revenues
(print and radio) & 32% of the quarters reported EBITDA.
n The company has also disclosed that the 'Hindi business' operating margins
were around the overall reported levels-20% (HT's OPM in Q2FY10 was
18.6%).
n In Q2 FY2010, the Hindi business reported revenues of Rs.1026 million,
operating profits of Rs.208 million translating to operating margins of 20%.
Overall (print + radio) HT reported revenues of Rs.3471 million, operating profits
of Rs.646 million translating to operating margins of 18.6%.
n We note that given its expansion into new geographies and the resilience in
regional markets; advertising growth for HT's Hindi segment has outstripped
the anemic growth exhibited by the national media markets over the last 4
quarters
