vengabeats
Nilesh Nagdev
Broking house, SSKI is bullish on Zee Telefilms . It has reiterated an outperformer rating on the stock.
The SSKI report on Zee Telefilms:
Zee acquires 50% stake in Ten Sports
"Zee has acquired 50% stake in Taj TV, which owns Ten Sports, a dominant sports broadcasting property in subcontinent and Middle East. Ten Sports currently owns very strong properties across sports - cricket, tennis, hockey, WWE, etc. Ten Sports clocked revenue to the tune of USD 60 million, EBITDA of USD 15 million and PAT of USD 8.5 million in FY06 and is expected to earn average annual revenue of USD 50 million over the next three years."
"While 40% of the revenues come through advertisement, 40% comes from pay revenues and remaining through syndication revenues. Ten Sports has distribution tie ups in Asia, Middle East and UK. We see this move as a major positive on account of strong sports property, synergy with Zee Sports and consolidation in the market and also attractive valuations."
Strong sports properties – a synergy to existing channel
"Ten Sports has telecast rights for few of the key sports properties like cricket telecast rights from the cricket boards of Sri Lanka, Pakistan and West Indies (has 150 days of cricket rights for the next two years), the US Open, Men's Hockey World Cup, UEFA Champions League, WWE, Motor GP, etc."
"Zee for some time now has been trying to scale up its sports channel and for which has been bidding aggressively. Now that Zee has acquired Ten Sports, it can garner substantial content sharing (the way Sony and SAB did during the Champions Trophy), infrastructure sharing and other operational synergies. While in the near term Zee will not gain on distribution front, as Ten Sports continues to be a part of One Alliance bouquet, however, post 2008, Zee can bring in Ten Sports on Zee Turner Bouquet and garner the distribution benefits."
Need not go overboard in new property acquisition
"Zee Sports, in pursuit to make a foothold in the sports genres has been very aggressive (has gone overboard) in acquiring cricket rights. In the process Zee has been acquiring rights at an unjustifiable price. Zee acquired rights for 25 day of ODI cricket to be played over next 5 years at the ICC Neutral Venue for USD 219 million. However, with acquisition of Ten Sports, Zee has readily got strong telecast rights on its side. This will ensure that Zee does not go overboard and can choose not to be a loss leader."
Market Consolidation – dominate the Asian market
"Sports Broadcasting genre is set for consolidation, as Zee acquires Ten Sports and SET is not too keen to acquire newer cricket rights. If Zee Sports manages to acquire the ICC Cricket rights for next eight years (~250 days of cricket including 2 World Cups, 3 Champion Trophies and 20-20 Tournaments) , Zee Group (including Ten Sports) will have the most attractive and relevant sports properties in the sub continent and largely eliminate the competition from ESPN–Star Sports. We see this as the biggest potential benefit."
Attractive Valuations
"Besides, immense strategic value that the acquisition adds, we also like the fact that transaction is attractively valued. Zee has valued Ten Sports at USD 114 million, which is just over 2.2x forward revenues, 9x EBITDA and 13.4x earnings. The acquisition is earnings accretive at the very onset. The valuation is also highly attractive considering that Zee would have paid much higher price on right acquisition to garner USD 50 million of revenues."
"With Zee making the right moves (content enhancement, investing in distribution business, and now acquisition of Ten Sports) and impending demerger, we continue to maintain our positive bias on Zee Telefilms. Reiterate Outperformer. "
The SSKI report on Zee Telefilms:
Zee acquires 50% stake in Ten Sports
"Zee has acquired 50% stake in Taj TV, which owns Ten Sports, a dominant sports broadcasting property in subcontinent and Middle East. Ten Sports currently owns very strong properties across sports - cricket, tennis, hockey, WWE, etc. Ten Sports clocked revenue to the tune of USD 60 million, EBITDA of USD 15 million and PAT of USD 8.5 million in FY06 and is expected to earn average annual revenue of USD 50 million over the next three years."
"While 40% of the revenues come through advertisement, 40% comes from pay revenues and remaining through syndication revenues. Ten Sports has distribution tie ups in Asia, Middle East and UK. We see this move as a major positive on account of strong sports property, synergy with Zee Sports and consolidation in the market and also attractive valuations."
Strong sports properties – a synergy to existing channel
"Ten Sports has telecast rights for few of the key sports properties like cricket telecast rights from the cricket boards of Sri Lanka, Pakistan and West Indies (has 150 days of cricket rights for the next two years), the US Open, Men's Hockey World Cup, UEFA Champions League, WWE, Motor GP, etc."
"Zee for some time now has been trying to scale up its sports channel and for which has been bidding aggressively. Now that Zee has acquired Ten Sports, it can garner substantial content sharing (the way Sony and SAB did during the Champions Trophy), infrastructure sharing and other operational synergies. While in the near term Zee will not gain on distribution front, as Ten Sports continues to be a part of One Alliance bouquet, however, post 2008, Zee can bring in Ten Sports on Zee Turner Bouquet and garner the distribution benefits."
Need not go overboard in new property acquisition
"Zee Sports, in pursuit to make a foothold in the sports genres has been very aggressive (has gone overboard) in acquiring cricket rights. In the process Zee has been acquiring rights at an unjustifiable price. Zee acquired rights for 25 day of ODI cricket to be played over next 5 years at the ICC Neutral Venue for USD 219 million. However, with acquisition of Ten Sports, Zee has readily got strong telecast rights on its side. This will ensure that Zee does not go overboard and can choose not to be a loss leader."
Market Consolidation – dominate the Asian market
"Sports Broadcasting genre is set for consolidation, as Zee acquires Ten Sports and SET is not too keen to acquire newer cricket rights. If Zee Sports manages to acquire the ICC Cricket rights for next eight years (~250 days of cricket including 2 World Cups, 3 Champion Trophies and 20-20 Tournaments) , Zee Group (including Ten Sports) will have the most attractive and relevant sports properties in the sub continent and largely eliminate the competition from ESPN–Star Sports. We see this as the biggest potential benefit."
Attractive Valuations
"Besides, immense strategic value that the acquisition adds, we also like the fact that transaction is attractively valued. Zee has valued Ten Sports at USD 114 million, which is just over 2.2x forward revenues, 9x EBITDA and 13.4x earnings. The acquisition is earnings accretive at the very onset. The valuation is also highly attractive considering that Zee would have paid much higher price on right acquisition to garner USD 50 million of revenues."
"With Zee making the right moves (content enhancement, investing in distribution business, and now acquisition of Ten Sports) and impending demerger, we continue to maintain our positive bias on Zee Telefilms. Reiterate Outperformer. "