Background:
The Company was promoted by the
Ansari family& was earlier listed as
Mid-Day Multimedia Limited. Pursuant to the Scheme of Arrangement with Jagran
Prakashan Limited, the entire print and publishing business of the Company,
along with all the related licences, trade marks, logos etc were transferred to Jagran Prakashan & the Company’s name was changed to Next Mediaworks Ltd
The radio business was initially
promoted as a wholly-owned subsidiary of the Company which later became a joint
venture between Next Mediaworks Ltd. and
BBC Worldwide Holdings B. V. (BBC), Next Radio Limited was among the first
private players to venture into private FM broadcasting and presently has
established "Radio One" as the premium FM Brand in 7 Indian cities .
Shareholding
in Next radio ltd :
Next
Mediaworks Ltd :72.24 %
BBC
: 18.19%
Ferrari
Investmens & Trading: 7.49%
FM
brand :Radio One
Locations
present :Mumbai, Delhi, Chennai,Kolkatta, Bangalore, Pune, Ahmedabad
The Company operates under
frequency 94.3MHz in all its cities except Ahmedabad where it operates under the
frequency 95 MHz.
Runs International format
stations ( English) in the key markets
of Mumbai & Delhi
Financials:
Equity:
Rs.58.30 cr
Consolidated
debt : approx Rs.28 cr ( as of March 31, 2013).This includes an unsecured loan
of about Rs.6.85 cr from promoters.
Key
Phase 3 highlights:
1)
Aims to expand private FM services to 313
cities from the current 86.
2)
839 new radio stations to be auctioned.
3)
All cities with population of one lakh &
above to be covered
4)
Allows Broadcaster the right to operate Multiple
frequencies ( i.e.more than one station in each city). This can have a far
reaching impact on the industry and is one of the most significant proposals in the policy.
5)
Licence period of Phase 3 frequencies to be
increased from 10 years to 15 years
6)
Tradability of phase 3 frequency licences to
be allowed and holding period reduced from 5 to 3 years.
7)
Networking to be allowed ( i.e. smaller
stations can take programming from larger stations with a similar language /
programming mix). This will significantly reduce cost of operations in the
smaller cities and make the business viable.
Concerns:
1)
Ambiguity
of the policy on extension of existing licences which start expiring 2015
onwards.This is a crucial grey area and can have significant negative impact.Clarity
on this is expected only after the Phase 3 auctions are over.
2)
Contingent
income tax disputed liabilities of approx 18 cr.
Valuation:
At the
cmp of approx Rs.3.80, the company is available at a Market Cap of around Rs.22
cr & an EV of Rs.50 cr or so.
In the
year ended March 2013,EBIDTA showed a transformational turnaround of Rs.18.42
cr as compared to Rs.0.26 cr in the previous year. Cash generated from
operations was Rs.12.70 cr- a first ever for the company.
Performance
during the 9-month period ending Dec 31, 2013 continued to be good with a
revenue growth of 16% to Rs.43.29 cr ( from Rs.37.37 cr) & an EBIDTA growth
of 14% from Rs.11.53 cr to Rs.13.15 cr. At the net level though, the company
remained in the red with a loss of Rs.1.08 cr.
Last
year, promoters were issued 60 lakh shares at Rs.10 each on a preferential
basis against conversion of their Rs.6 cr loan to the company. Currently
promoters own 56.08%.
Bennett
Coleman & Co Ltd owns 6.20% in the company. Bennett Coleman & Co Ltd is
one of the promoters of Entertainment Network India Ltd,which runs the Radio
Mirchi FM station.
The company’s presence in 7 of the top 10
cities in India makes it an attractive takeover candidate for large &
serious long term FM broadcasters. I have highlighted the key risks/ concerns
visible to me.The current valuations are attractive and the ‘risk premium’
seems priced in.
At the time of writing this
report, the author /his family have an investment interest in the stock
mentioned above. Under no circumstance does the information in this report
represent a recommendation to buy or sell the above-mentioned stock. This
report has been prepared and issued on the basis of publicly available information,
internally developed data & other sources believed to be reliable. This is
just a suggestion solely for information purposes and does not constitute a
solicitation to any person to buy or sell a security. While the information
contained therein has been obtained from sources believed to be reliable, no
responsibility (or liability) is accepted for the accuracy of its contents.
Readers using the information contained herein are solely responsible for their
actions and are advised to satisfy themselves before making any investments.
