D. B.Corp - a newspaper company


(smehta) #21

DB Corp Result:

Sales 6.32% YOY 16.36% QOQ
PAT 6.63% YOY 33.30% QOQ

Segmental Revenue:
Printing: 4.89% YOY 15.4% QOQ
Radio: 12.38% YOY 21.65% (New Radio business not contributing)
Event: 124% YOY 4X QOQ (Unexpected + Low base)
Internet: 33.08% YOY 16.4% (unexpected + Low Base)

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/1781D265_CE2E_47AA_B6C8_0DA6C591605C_123407.pdf


(weblinsolutions) #22

Here are my notes from Q3 Conference Call. Information from management commentary and answers to the questions are combined into relevant section. Questions were answered by Pawan Agarwal, Dy.Managing Director, DB Corp.

Digital Business:

Platform: They have created their own recommendation engine using Bigdata and they track all the data in real time. They are putting efforts to improve the digital platform [website].

Usage Pattern: All the website content is consumed on the website itself. Data is not shared on the external platforms. They do not participate in Facebook Instant Articles. All the traffic from the social media is forward to their website. Once a user comes to their website then they start spending more time and read more articles. 32-40% traffic comes directly from the search engine, mobile app, etc. Rest is using social media, etc. Large part of traffic is coming from the markets where they don’t even have a physical presence. Foreign traffic is also there from specific communities like Gujaratis, etc. They don’t have a physical presence in UP but they still have a large local team to report for the online news from UP.

Revenue: 33.08% increase in the Digital Advertisement revenue this quarter. Revenue is not the primary focus. Primary focus is to ensure the stickyness of the visitors and to engage them more on their website. Promoter says that Digital monetization is a derivative of the type of userbase and user base size. Focus and emphasis is building on the network first. There are no other drivers of the growth for the digital revenue. They do not have subscription income and not expecting any subscription revenue for the next few years.

Future Plans: They are going to spend money to increase the growth here. They plan to start producing their own videos for the platform.

Event Business:

Event business is very much market dependent. They did not predicted any future growth for it. Although, they are actively scouting for it.

Radio Business:

Growth of 12.38% this quarter. MyFM have the highest EBIDTA margins in the sectors where they are market leaders. Hardly any new revenue from the new stations yet. Radio business has been growing at 30% for everybody including DB Corp. They were confident that they will be able to post healthy double digit growth for the next few years when asked about it. Although, they were not specific about the number. Year-to-Date (YTD) topline has grown 18% without the new stations and 3% for the new stations. They will be waiting till the next quarter before disclosing all the revenue information about the each new radio station. It is fair give them some time as it’s been only 4 days since the launch of Nashik Station and 1 month since the launch of the Aurangabad radio station. They are confident that they will be able to capture huge market share in these new markets as they already have some sort of presence in there. Increase in the operating costs, manpower costs, etc for the new stations are on the lower side according to the management.

Printing Business:

Revenue: Growth of 4.89% YOY for printing business. It will take few months time to stabilize due to effects of Demonetization and they can already see slight improvement. Growth could have been in double digit if there was no demonetization. It’s been 2-3 years since they showed double digit growth. They were hopeful about double digit growth after reviewing the October numbers [Diwali]. They are not sure how the economy will move forward going ahead. Increase in the revenue isn’t due to the price increase. It is because of the exceptional numbers of October. Receivables haven’t been affected and there could be a slight delay of 10-15 days in some places. Nothing to be concern about.

Advertisement added ratio [number of pages] was encouraging Diwali month. October pagination was high.

One time expense includes Business promotion of 2 crores and some outsourcing expenses.

Advertising Performance:

Local advertising contributes to 60% of the revenue. It includes local business and SMEs. This revenue business won’t be permanently effected as they are not some kirana dukhans, etc. They are local hypermarkets, automobile dealers, jewelers, state government, etc. They won’t shut shop. All these guys are not advertising as the consumption pattern is hit by demonetization. Some of these are already coming back to normal.

Impact on the National advertisers is low. These companies are still launching new products and brands. For example: Maruti launched Ignis and Tata launched Hexa.

  1. Real estate have been negatively hit. Developers and buyers are scared. They are slightly doubtful about real estate going forward. Buyers are skeptical to make investment in real estate as they are expecting price reduction post demonetization. This sector may recover if Government keeps to their promise of Affordable housing.

  2. There was decline in the advertisements from FMCG & Healthcare sector.

  3. Automotive and Lifestyle sector were good. Substantial improvement was improvement was seen in January 2017 for the automobile sector.

  4. Banking & Financial sector outperformed everybody else. Advertisement from Government continued to stay on good numbers. Government revenue contribution is around 11% and there was a increase of 1% this quarter.

Future Plans: They do not have any new market on the cards. They have certain expansion plans for the existing markets which has not been affected due to demonetization. They are looking at reducing the expenses. They will be reducing manpower and make use of technology wherever possible. Although, in their segment, 40-45% cost is the printing expense. Somebody asked if they will be able to maintain the same printing cost and to which they replied 0% increase in the next year in the cost is not the right thing to say. 144000 tonnes paper consumption this quarter.

Circulation: Circulation growth was low at 0.5 % compared to the previous growth of 3%. They says there are two ways to look at the circulation growth. Actual number of copies or cover price are the two ways to look at the circulation. You can’t look at 5% growth unless you make launch in a new market. We should be able to maintain 1-2% circulation growth in existing market. Daily circulation as per Q3 is 52.5 lakh copies. Net realization is 2.62 paisa compared to the 2.54 paisa of the previous quarter.

They have 62 editions and the cover price for each edition differs from market to market. They benefit in the market where they are the leader. [20-40 rupees] In the market where they are second or close second, price is similar or 10 rupees higher than the competition.

I really do not understand how the cover price concept work and will be happy if some body can explain.

They have launched few campaigns in Punjab and Maharashtra to engage more readers.

Entire volume growth has come because of the Yield. Nov-Dec were decline in the volume growth. They do not have the exact numbers but there was a double digit decline in the Nov-dec volume growth. They are looking at high single digit volume growth or double digit volume growth going ahead.

Political: UP is not their market. Punjab is their market. Their experience says election spike only happens for a particular month [not for 6 months or long period] and revenue is not substantial. Volume growth may increase in Punjab for this quarter.

There were more things discussed such as something called DVP Pricing, Input tax, IR. I do not understand anything of these. Advertising is not a part of the GST.

Things now largely depends on how quickly the economic recovers and how it progresses ahead but the company seem to be doing their part in a good manner. I hope the shareholders are benefited with the long term vision of DB Corp.

Disc. Invested with a long term view.


(Saket) #23

Short Summary of Q3 conference call:


we have also prepared few other summaries. Sharing here: https://goo.gl/5RTk0o

Read disclaimer for summaries here: https://goo.gl/HELov8


(yourraj) #24

I was checking the credibility of management and I found some harassment case against one of the CEO of radio station
Source :

And now the same employee has became
president of the group
Source : http://www.mxmindia.com/2017/11/harrish-bhatia-to-move-as-president-print-at-dainik-bhaskar/

And now the best of the propaganda Db group has hired UK company for whistleblower

Source : http://www.mxmindia.com/2015/03/dainik-bhaskar-joins-tata-steel-ranbaxy-to-hire-uk-firm-to-attend-to-whistleblowers/

Disl: Not invested in the company this is not intent to defame anyone the material shared is in publicly domain.

I Haven’t found any information regarding outcome of the harressment case but it tossed me a Question : Can we trust company management ? Looking for some insight from Vp & seniors .
Regards


(yourraj) #25

I also have concerns as will this company sustained in next 10 years in the light of growing digital media usage ( News section ) and growing usage of free music Apps (FM station ) usually one change the TV channel if some advertisement comes .
In my option one can make difference if one can have copyrighted material e.g Saregama (Old HMV or Venus or T-series if we talked about Bollywood) Most people tune to FM for song this view can be mine

This is facinating business but what will separate it from being good business to became great business which can be assertained by looking at the question,What moats it possessed to increase the price ?because all moats can’t add value to shareholders.In Bull run all good business look great but you have to implement the Theme of forum I.e. “Separating the wheat from Chaff”

Like FB has networking which better than twitter but LinkedIn is having greater monetisation strategy than any of the social network

Regards


(Growth_without Debt) #26

Interesting play in news and radio company at it’s lowest P/E. Zero debt, good cash flow and good ROCE, ROE, good dividend yield.

Reputed investors like Ocean Dial (Sanjoy Bhattacharya), AZIM PREMJI TRUST, NALANDA INDIA EQUITY FUND LIMITED, etc are increasing their stack on slow and steady way.

Disc - Invested today at 285. Your expert views are invited


(Dinesh Sairam) #27

This post is not directly related to DB Corp, but it is tangential to all newspapers in general.

Warren Buffet, in the recent Berkshire Hathaway AGM mentioned the possibility of a massive consolidation of Newspapers in the US, with only 3 of them emerging as clear winners:

I think this relates to Dr. Nicholas Nassim Taleb’s concept of Anti-Fragility very well:

So really, the question in the newspaper space is, once that consolidation begins, who will be in the best position to gain from the disorder? Surely not all newspapers are going to disappear, even considering the rate of growth in digital content. But which newspaper will have the last laugh? Maybe a topic worth pondering on.


(Growth_without Debt) #28

DB Corp announced buy back @340 and current price is ~250.


(harshb232) #29


There has been a expose on DB group.Currently the recordings and communications are not released because DB group has obtained an injuction fro Delhi High Court.


(Amitt) #30

It is a open secret that all media houses are working as proxies for various political parties, offcourse for the highest bidder. In the above report almost all Major Media groups were ready to be sold out. So nothing special about DB Corp.

Coming to buyback, for retail 15% shares amounting to almost 13 Lakh should be reserved. Given that total retail holding is 45Lk shares, will the acceptance ratio be around 29%, assuming all the shares are tendered??

Also the promoters are participating it seems, so does that mean retail quota will come down further?


(harshb232) #31

How did you arrive at the number “45 Lakhs” of retail holding?


(Amitt) #32

The buyback proposal has the details of shareholding pattern…

Seems Retail has 49 lakh shares and not 45 Lakh shares.
Although some might have in excess of 2 Lakh amount.


(harshb232) #33

I think you are getting confused between share capital and the definition of a retail investor. Share capital is defined as face value*Number of shares. Where as definition of retail investor is person having shares worth less than 2 lakhs on the record date.


(AmitContrarian) #34

Who ever holds it before record date will get the chance to participate in buyback ?
I guess 18 july is the record date .


(ragav) #35

Yes , this is the correct way to put it . share capital is the FV of shares . Ideally we will get the number in distribution of shares in AR. Or we can take the share capital and value it based on Fv to arrive at the number .


(sambandham82) #36

As per below calculation, all acceptance ratio is 107% assuming no change in retail holding after FY17. But even if retail holding is high, intuitively it looks like there is a high probability that acceptance ratio can be >75%.

Buyback Amount (Cr) 312.4
Buyback Price 340
Buyback Shares (Cr) 0.919
Retail Allotment (%) 15
No. of Shares (Cr) 0.137823529
Retail limit 200000
No. of shares 588
CMP 281
No. of shares < 2 Lakh worth capital (As per AR-2017) 0.1283
Gain/share in Buyback 59
Acceptance ratio 107.4302286

(ragav) #37

The 2 Lakh limit would be based on price as on Record date . Share holding pattern have persons holding 200000/10 = 20000 shares of FV 10 . So Annual Report is the no to go by . We can see the Increase in shares or delivery in this period and come to a approx holdings of Retailers . Theoretical ratio may vary drastically in some cases .

In DB Corp if the Acceptance is well above 100 % and if people tender all their shares then acceptance could be well above 100 % .

There are more to see than just the arbitrage which some people are very ignorant , Sonething like It’s current cash position , BEP ( break even point ) if it goes below BEP and is a loss what do you do ? Can you hold such companies or exit ? (Ex : Jagran Prakashan)


(sambandham82) #38

I think its not that 200000 is based on FV but market price on record date. so 200000/(280 to 340) is around 800 shares. one can understand that 18.03 cr shares are with 122 shareholders who are not selling their shares under retail category. so it cannot increase drastically in case of DB corp buyback. No one can tell exactly what is the retail holding on record date but can only approximate based on 2 factor : 1)previous AR and 2)distribution of shares.

your BEP holds good in case of TCS @ 31 P/E but DB corp is now @ 15 P/E and jagran was trading at 15 P/E before buyback and hence there is good margin of safety as downside is limited. Even if it goes below BEP, buy or hold happily. Anyway, one cannot buy a stock based on only buyback but also on fundamental basis. i liked DB corp but did not buy for a long time as it was trading > 20 P/E for many years.