UBS Investment Research
Sun TV Limited
R eiterate our cautious view [EXTRACT]
Sun TV’s share price underperformed BSE Sensex index by 37% YTD
Sun TV’s share price is down 48% YTD due to newsflow regarding its Chairman’s
alleged involvement in a 2G scam and an unfavourable Tamil Nadu (TN) state
assembly election result, wherein the Dravida Munnetra Kazhagam (DMK) party
was voted out.
Fundamentals still intact; a worst-case FY13E EPS impact of a 27% drop
Our discussions with media experts affirmed our view that the fundamentals of Sun
TV’s business in TN are likely to remain intact in the near term despite negative
newsflow on the 2G scam and political/regulatory developments, such as Arasu
Cable’s launch. This is mainly due to Sun TV’s strong content offerings and large
movie library. We estimate a worst-case FY13E EPS impact of a 27% decline, if
its dominant viewership share comes under significant pressure in TN.
Maintain our anti-consensus cautious view
Newsflow suggests the Central Bureau of Investigation (CBI) has filed a first
information report against Sun TV’s chairman Kalanithi Maran and his brother
Dayanidhi Maran in relation to the 2G scam. We maintain our anti-consensus
cautious view on Sun TV as we believe further developments regarding the 2G
case could create an overhang for its share price in the near term.
Valuation: Sell rating; Rs300.00 price target
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool. We assume a 15% WACC
to incorporate the above high-event risk. We believe the risk-reward profile is not
favourable at current levels.
Sun TV Limited
Sun TV Network Ltd (Sun) is the largest TV broadcaster in south India and has
channels catering for the four regional languages: Tamil; Telegu; Kannada; and
Malayalam. Kalanithi Maran is the majority shareholder with a 77% stake. Sun
and its two subsidiaries have radio licences in 44 cities.
Statement of Risk
We believe the company faces regulatory risks and competitive risks in its core
business of broadcasting.
Sun TV Limited
R eiterate our cautious view [EXTRACT]
Sun TV’s share price underperformed BSE Sensex index by 37% YTD
Sun TV’s share price is down 48% YTD due to newsflow regarding its Chairman’s
alleged involvement in a 2G scam and an unfavourable Tamil Nadu (TN) state
assembly election result, wherein the Dravida Munnetra Kazhagam (DMK) party
was voted out.
Fundamentals still intact; a worst-case FY13E EPS impact of a 27% drop
Our discussions with media experts affirmed our view that the fundamentals of Sun
TV’s business in TN are likely to remain intact in the near term despite negative
newsflow on the 2G scam and political/regulatory developments, such as Arasu
Cable’s launch. This is mainly due to Sun TV’s strong content offerings and large
movie library. We estimate a worst-case FY13E EPS impact of a 27% decline, if
its dominant viewership share comes under significant pressure in TN.
Maintain our anti-consensus cautious view
Newsflow suggests the Central Bureau of Investigation (CBI) has filed a first
information report against Sun TV’s chairman Kalanithi Maran and his brother
Dayanidhi Maran in relation to the 2G scam. We maintain our anti-consensus
cautious view on Sun TV as we believe further developments regarding the 2G
case could create an overhang for its share price in the near term.
Valuation: Sell rating; Rs300.00 price target
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool. We assume a 15% WACC
to incorporate the above high-event risk. We believe the risk-reward profile is not
favourable at current levels.
Sun TV Limited
Sun TV Network Ltd (Sun) is the largest TV broadcaster in south India and has
channels catering for the four regional languages: Tamil; Telegu; Kannada; and
Malayalam. Kalanithi Maran is the majority shareholder with a 77% stake. Sun
and its two subsidiaries have radio licences in 44 cities.
Statement of Risk
We believe the company faces regulatory risks and competitive risks in its core
business of broadcasting.
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