>DISH TV (CENTRUM)

Richly valued

■ Downgrade rating to Sell from Accumulate: We have revised our rating to Sell from Accumulate with a target price of Rs31.4/share. Even after capturing the company’s improving business fundamentals, we believe that stock is richly valued at FY10E EV/sub of Rs6,900. We value the stock at FY10E EV/sub of Rs5,600.

■ Q4 revenue below estimates: Q4 revenue at Rs2.0bn (up 7.5% QoQ and 52.4% YoY) was below our estimate of Rs2.4bn. The lower-than-expected revenue was due to the 14% YoY ARPU decline to Rs136/month, while we anticipated an increase in ARPU.

■ EBITDA break-even a positive surprise: EBITDA margin improved from negative 20.2% in Q3FY09 to positive 2.0% during Q4FY09. This sharp improvement came on the back of 23% QoQ reduction in content cost since company has moved from a variable content cost model
to a fixed content cost model during the quarter.

■ Estimates revised upwards due to change in content cost model: We have raised our EBITDA estimates to Rs1.0bn from an expected loss of Rs0.9bn for FY10E. In addition, we raised EBITDA margin estimates for FY11E from 6.5% to 23.7%. This change is primarily due to shift in its content cost model from variable cost per sub to fixed cost model.

To see full report: DISH TV