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We see an EPS upside of Rs13.1 for Sun TV Network as the company has the potential to garner Rs15bn (Rs7.8bn over our FY15E) from FY17 after pan India digitization. Sun TV was not able to reap the benefits of digitization in Phase-I, but the benefits from 4 out of 5 Phase-II cities will start to accrue in FY14 itself with Andhra Pradesh High Court lifting the stay on digitization for Hyderabad and Visakhapatnam cities. Higher subscriber declaration and 6x jump in ARPU for cable could be the game changer for the company. Hence, we re-iterate our BUY rating on the stock and recommend a switch from ZEEL (Hold) to Sun TV Network.
Minuscule revenues from cable in current environment: We believe Sun TV is not able to monetise its cable subscribers in the current environment due to significant under declaration by LCOs, Arasu Cable giving Sun TV Network only Rs25mn/month in Tamil Nadu, Sun TV Network channels being free to air in Chennai and fixed fee deals with MSOs. Hence the company garners ARPU of Rs4.2 from cable against Rs38 from DTH. Despite having mere 23% of subscribers, Sun TV Network garnered 72% of domestic subscription revenues from DTH on the back of 100% declaration and high ARPU.
Digitization benefits for Sun TV to start with Phase-II: We believe the legal tussle and digital license for ARASU in Chennai were the prime reasons for Sun TV's inability to reap the benefits of digitization in Phase-I. However, the benefits from 4 out of 5 Phase-II cities will start to accrue in FY14 itself with Andhra High Court lifting the stay on digitization in Hyderabad and Visakhapatnam cities from August 20 as per our interaction with the company and MSOs. With 3.9mn TV households (3.3mn cable HH), the upside from 4 cities of Phase-II (Bangalore, Hyderabad, Mysore and Vishakhapatnam) could be Rs783mn.
EPS upside to be Rs13.1 post pan India digitization: We believe Sun TV Network could have an EPS upside of Rs13.1 as it has the potential to garner Rs15bn from FY17 post pan India digitization implying incremental subscription revenues of Rs7.8bn over our FY15E based on a subscriber base of 14.2mn for DTH, 28.4mn for cable and assuming ARPU of Rs38/Rs25 for DTH and cable respectively. Current subscriber linked deals with the MSOs are being done at an ARPU Rs25 as per our interaction with the management. We have modelled domestic subscription revenues of Rs7.2bn in FY15E (Rs1.94bn for cable and Rs5.3bn for DTH), CAGR of 18.6% for FY13-15E.
Valuations attractive; Switch from ZEEL to Sun TV Network: Sun TV is currently trading at 18.5x and 15.5x FY14E and FY15E EPS of Rs21.0 and Rs25.06 respectively which is 16% below its 5-year mean valuation and all time high discount of 35% to ZEEL. Hence we maintain our BUY rating on the stock with a target price of Rs501 (20x FY15E) and recommend a switch from ZEEL (Hold) to Sun TV Network. Downside risk to our estimates can be the ongoing CBI enquiry against the promoters, delay in digitization in Tamil Nadu and the company not being able to hike ad rates.
Source: Equity Bulls
Posted On: 2013-09-04 21:27:52
Sun TV Network - Digitization benefits set to accrue - Centrum - EquityBulls.com
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Minuscule revenues from cable in current environment: We believe Sun TV is not able to monetise its cable subscribers in the current environment due to significant under declaration by LCOs, Arasu Cable giving Sun TV Network only Rs25mn/month in Tamil Nadu, Sun TV Network channels being free to air in Chennai and fixed fee deals with MSOs. Hence the company garners ARPU of Rs4.2 from cable against Rs38 from DTH. Despite having mere 23% of subscribers, Sun TV Network garnered 72% of domestic subscription revenues from DTH on the back of 100% declaration and high ARPU.
Digitization benefits for Sun TV to start with Phase-II: We believe the legal tussle and digital license for ARASU in Chennai were the prime reasons for Sun TV's inability to reap the benefits of digitization in Phase-I. However, the benefits from 4 out of 5 Phase-II cities will start to accrue in FY14 itself with Andhra High Court lifting the stay on digitization in Hyderabad and Visakhapatnam cities from August 20 as per our interaction with the company and MSOs. With 3.9mn TV households (3.3mn cable HH), the upside from 4 cities of Phase-II (Bangalore, Hyderabad, Mysore and Vishakhapatnam) could be Rs783mn.
EPS upside to be Rs13.1 post pan India digitization: We believe Sun TV Network could have an EPS upside of Rs13.1 as it has the potential to garner Rs15bn from FY17 post pan India digitization implying incremental subscription revenues of Rs7.8bn over our FY15E based on a subscriber base of 14.2mn for DTH, 28.4mn for cable and assuming ARPU of Rs38/Rs25 for DTH and cable respectively. Current subscriber linked deals with the MSOs are being done at an ARPU Rs25 as per our interaction with the management. We have modelled domestic subscription revenues of Rs7.2bn in FY15E (Rs1.94bn for cable and Rs5.3bn for DTH), CAGR of 18.6% for FY13-15E.
Valuations attractive; Switch from ZEEL to Sun TV Network: Sun TV is currently trading at 18.5x and 15.5x FY14E and FY15E EPS of Rs21.0 and Rs25.06 respectively which is 16% below its 5-year mean valuation and all time high discount of 35% to ZEEL. Hence we maintain our BUY rating on the stock with a target price of Rs501 (20x FY15E) and recommend a switch from ZEEL (Hold) to Sun TV Network. Downside risk to our estimates can be the ongoing CBI enquiry against the promoters, delay in digitization in Tamil Nadu and the company not being able to hike ad rates.
Source: Equity Bulls
Posted On: 2013-09-04 21:27:52
Sun TV Network - Digitization benefits set to accrue - Centrum - EquityBulls.com
..
