Next Mediaworks Ltd

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. 

Procter & Gamble Hygiene & Healthcare – The silent roar of a Whisper

I’d covered the company about 2 ½ years back ( reproduced at the end of this note for ease of reference) Here goes a small update.

Market penetration

 FMCG products in India (market penetration):

Toilet Soaps: 90-95%

Washing powder & detergents bars: 85-90%

Hair Oil: 70-75%

Toothpaste: 60-65%

Shampoo:50-55%

Fairness Creams: 15-20%

Sanitary Pads: 10-12%

Sanitary Pads have an absurdly low market penetration in India.

Just about 10-12% of the 35 crore odd menstruating women in India use sanitary Pads.

The number is between 90-95% for countries like UK, Germany, USA and about 50-60% for China & Thailand.

Even Kenya has a penetration of about 30% while for Uganda & Tanzania the number is about 15-16%

Even in Urban Areas in India, not more than 2 out of every 10 menstruating women use sanitary pads.

Currently not more than 10-12% of sanitary pads sales are in rural areas in India

Market Development:

Over the last 8-10 years, P&G has reached out to nearly 2 crore school girls across India and provided education about menstrual cycles & provided free smaples.

In 2012-13, alone, P&G reached out to nearly 40 lakhs girls across 15,000 schools

So, the market is far , far from being mature and remains wide open .P&G is doing all it takes to not only grow the market but also retain its market share which is currently about 57-58%.

P&G has a fantastic market coverage with contact to close to more than 7 lakh outets.

The entry of new players like Sofy and new found aggression of J&J ( Stayfree) over the last few years will only help in making the pie size larger .

At the current market price of about Rs.3200, the  market cap is about Rs 10,400 cr and EV about Rs.9700 cr. It is my strong belief that the company offers one of the most attractive and  secular growth opportunities available in the Indian market.

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. 

 Procter & Gamble Hygiene & Healthcare: A ‘Period’ of huge growth ahead

Procter & Gamble Hygiene & Healthcare (PGHH) is a 2 brand company: Vicks & Whisper. These in turn have brand extensions.

We will concentrate on Whisper.( Feminine Hygiene i.e.Sanitary Pads)

Feminine hygiene is hygiene absorbent products engineered to absorb and retain body fluid without causing any leakage. The user should always feel dry and comfortable. It consists of an absorbent pad sandwiched between two sheets of nonwoven fabric. 

The menstrual cycle starts for young women between the ages 11 - 17, frequently around 12-1 3 years. On average a woman experiences a period every 28^th day, 12 - 13 times in a year. A menstrual period normally lasts 3 - 7 days. The loss of fluid in a period is on average half a cup or 65 - 80 ml. The menstrual pattern is influenced by giving birth and contraceptive methods. Menstruation lasts until menopause at the age 45 - 55. The feminine hygiene products market has evolved over more than 100 years to a more than US$ 20 bn.

PGHH has 2 plants and Baddi ( HP ) and 1 in Goa.

Promoters ( P&G, USA through its assocaites and subsidiaries) holds 70.64% of the paid up equity capital

PGHH Feminine Hygiene sales for the last 7 years:

2003-04: Rs.142 cr

2004-05: Rs.163.58 cr

2005-06: Rs.226.8 cr

2006-07 : Rs.282 cr

2007-08: Rs.339.79 cr

2008-09: Rs.428.28 cr

2009-10: Rs.532 cr

2010-11 : Rs.640 cr ( expected)

As can be seen from the above, sales have grown by about 4.5 times over a 8 year period. 

Market size for Feminine Hygiene products:

As per Census 2010,

Total women in India: approx 58.5 cr

Of these, women in urban India : approx 16.25 cr

Women in menstruating age in India : approx 30 cr

Of these, women in urban India : approx 8 cr

At present, the sanitary napkins market in India is estimated to be worth around Rs 1,300 crore. PGHH market share is approx 50%.

Equity : Rs.32.46 cr

Debt: Nil

Current Market price: Rs.1950

Market Cap: Rs.6330 cr

Cash in hand (including loans to group companies) : Rs.432 cr ( as of June 30, 2010) i.e. Rs.132 per share

Some of the key negatives:

1)      Excise duty on sanitary pads was increased last year

2)   Sanitary pads as a category has seen increasing competitive pressure with entry of new players like Japanese Unicham ( brand ‘Sofy’), Mankind Pharma ( Don’t Worry) besides existing players like J&J ( Stayfree), Kimberly Clarke( Kotex), Kaul High ( She) Gufic (Shapers- this is a marginal player) leading to price corrections.

Programs to reach to consumers:

1)      Point of market entry :  about 24 lakh menstruating girls across private and public schools all over India. Over the last 5 years, through this program, PGHH has touched more than 70 lakh girls. In the urban schools, the top tier brand ‘Whisper’ was sampled while in the upcountry schools, the economical mid tier ‘Choice’ was sampled.

2)      Direct to Home program: This house to house program especially in the lower class towns is aimed at educating women about the benefits of using sanitary napkins (Choice) and breaking the affordability barrier. Over the last 5 years, through this program, PGHH has touched close to 20 lakh women

3)      Partnership with National Rural Health Mission: Done initially in Rajasthan to provide education and sanitary protection to rural women (cloth users) to help them lead a healthier , hygienic and more productive life.

The various initiatives being done by PGHH to open the future opportunities ‘pipeline’ have led to disproportionately high promotion expenses over the last 5 years. Though the benefits from these have been visible in terms of increased category sales, these are but a small precursor to the unfolding of the real explosion of demand which shall happen over the next 4 years.I hold the belief that PGHH , unless there are any major unexpected obstacles, has the potential to be valued at  a market cap of  Rs.20,000 cr over the next 4 to 5 years and presents an opportunity which may appear expensive at current price to earnings but offers an investment in what shall pan out to be one of the most lucrative product opportunities in the foreseeable future.

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. 

Godfrey Phillips India Ltd

Had done a  note on Godfrey Phillips earlier

http://libraryequity.blogspot.in/2011/01/godfrey-phillips-well-poised.html

Some developments have taken place since then:

1)      Rabale , Navi Mumbai plant is  now completely operational. The plant is built on a 44,000 sq metres ( approx 11 acre ) plot with a 21,500 sq metre factory buildingThe plant has been built on a high technology platform with maximum automation. The Technology tripod  incorporates three major new technologies. These correspond to the three main areas of production: the primary manufacturing which prepares the cured tobacco leaf for production, the secondary manufacturing which involves cigarette making and packing, and the warehouse and despatch area. The plant won’t require more than 100 workers.

2)      236 unionized staff and workmen attached to its plant at Andheri, Mumbai, opted for the VRS  announced by the company. The financial outlay on this account amounted to Rs. 35 crores approx and has been accounted for in the June 2013 P&L. Further, the production facilities at its plant at Andheri, Mumbai have been largely re-located to the new plant at Rabale.

3)      Registered office has been shifted from Andheri to Lalbaug, Mumbai

4)      The company has been accounting for exchange loss on its Forex loan on a consistent basis and we may see some more of that in the current quarter too.

5)      June quarter saw a good scale up in revenue though profitability was affected due to VRS & forex loss provision

Management pedigree is mediocre at best . Notwithstanding the same, going ahead the benefits from geographical expansion  and right sizing should be substantial.  EV is about 2800 cr @ cmp of Rs.2700.

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.