>MEDIA SECTOR (ICICI SECURITIES)

Capital raising activity picks up

Network18, Dish TV & IBN18 raise capital; Jagran Prakashan promoters buy in
Buoyancy in capital markets led to a flurry of fundraising activity, with Network18, IBN18 and Dish TV raising capital. Network18 raised Rs3.25bn via preferential allotment and QIP;IBN18 raised capital through sale of treasury stocks; and Dish TV promoters encashed some equity to fund the second tranche of the rights issue. All three witnessed significant erosion in stock price, of up to 20-30%, post the fundraising exercise. Jagran Prakashan (Jagran), however, witnessed promoters buying additional ~4.5% stake and has been outperforming the broader markets since June ’09.

Hindi GECs – Lively competition in tier I; NDTV Imagine & Sony consolidating in tier II
Competition in tier I of Hindi GECs heightened, with all three channels – Colors, STAR Plus & Zee TV – at the #1 spot in different weeks over weeks 23-27 of CY09. Colors retained an edge, while Zee TV continued to consolidate and STAR Plus continued to slip. During prime time, Zee TV was #1 during weeks 26-27 and that too with no blockbuster movies, events of grand finale shows . In tier II of Hindi GECs, NDTV Imagine and Sony Entertainment TV (Sony) have consolidated positions and garnered 20% of prime-time market share between themselves, up from 13-15% three months ago post introduction of a fresh slate of programming. NDTV Imagine has maintained >100 GRPs for six consecutive weeks.

Valuations – Prefer print companies and Sun TV Network (Sun)
We recently upgraded HT Media (HTML) to BUY from Hold and Jagran remains our top pick in the sector. We expect the crumbling newsprint prices (down 50% from recent peak) to contribute to high profitability of print companies. We also prefer TV18 and Network18 as their stocks offer attractive entry points at current market prices owing to heightened concerns about competition and poor Q4FY09 results. We prefer Sun over Zee Entertainment Enterprises (ZEEL) and recommend investing in ZEEL only on dips.

Key factors to watch
i) Impact of cost-control exercise (initiated in FY09) on Q1FY10 results ii) Fundraising by IBN18 iii) Newsprint price movement post the steep US$100 decline in past five weeks iv) Performance of NDTV Imagine and Sony, which have introduced a new set of programming.

To see full report: MEDIA SECTOR