>HT MEDIA (MFGLOBAL)

Warmed Up: Yet to Catch Fever 104

We remain positive on HT Media even as the stock has risen 51% since our upgrade on 29 March 2009. While continued strength in readership for Hindustan Times, Hindustan, and Mint provides support to our estimates, a surge in radio ratings is a positive surprise. Concerns on private treaties (advertising for equity deals) expressed recently in media (largely in the context of BCCL), are a potential short-term negative.

All of a sudden, Fever 104 rocks!: In Radio Audience Measurement (RAM) ratings for Week 17, Fever 104 has emerged as the #1 channel of Mumbai, and #2 channel in Delhi and Bangalore (see appendix for details). Healthy ratings of Fever 104 could raise earnings, and also offer opportunities to promote its own products and provide a wider variety of solutions to media buyers.

Fever 104 broke even in 4Q09: Fever 104 reportedly broke even in 4QFY09, even before the radio stations saw a ramp up in ratings. S. Keerthivasan, CEO, HT Music and Entertainment Ltd has said “...We are poised to become the most profitable radio operation in the country in times to come.”* Our estimates incorporate a minor loss for HT Media radio operations in FY10 (~Rs 250mn loss
for FY09).

IRS 2009 R1 results—HT Delhi continues to lead on AIR: IRS 09 R1 results indicate that the newspapers of the company continue to perform, although growth has slowed. Mint and Hindustan have shown continued growth, while Hindustan Times continues to be #1 in Delhi and NCR on Average Issue Readership (AIR). HT Mumbai readership grew ~4% over the previous survey.

Mint readership trends positive, to grow in visibility: HT Media’s business newspaper, Mint, has entered into a content partnership agreement with TV-18— positive as it provides targeted support to the Mint brand, especially in light of the reports that Mint is set to launch two new editions in Kolkatta and Chennai*.

Media Reports on BCCL’s private treaties’ losses likely to weaken sentiment: Recent media reports have questioned private treaties, and some have indicated that Bennett Coleman and Company Limited may have incurred losses in excess of 40% on private treaties entered into by the company (see appendix). This is likely to be a sentimental negative for HT Media stock, with
results around the corner.

We see a strong possibility of both earnings improvement and continued multiple expansion in the stock as concerns on radio operations weaken. We reiterate our BUY rating on HT Media with a price target of Rs 88.

To see full report: HT MEDIA