One of the concerns seems to be the shift in the advertising spend pie from print to digital. This certainly impacts the long term prospects for newspaper companies. While advertising spend on print is growing at ~5% the proportion of total advertising spend it represents is shrinking.
The following link provides some useful statistics.
@rohitbalakrish_ and @bheeshma
Could you please help me understand how are you getting the Cash figures of 630 crores and 587 crores respectively?
As per Q2 results available at BSE, Non current investments is 359.75 cr, Current investment is 286.03 cr and Cash&Cash equivalents 39.27 cr.
I have been observing hidustan epaper since last few months frequently. This quarter we have seen many full cover page ads in comparison with previous quarters. Companies like Flipkart, snapdeal, Maruti, Quikr have spent heavily during this years festive season. We can expect good numbers this quarter from hindustan.
I am wondering why should someone buy HMVL for 2200 cr market cap (at current share price of around Rs.295), when its parent company holding 75% shares of HMVL is available for 2000 cr market cap (at current market price of around Rs.80). It has some cash in hand as well. Effectively if we discount HMVL and the cash in hand of HT media, we might get its many other businesses including the English newspaper “Hindustan Times”, Business Daily “Mint”, Job portal “Shine”, FM radio “Fever FM” almost free.
Can you please share the logic for preferring HMVL over HT Media? Do you think other businesses will eat away the earnings from HMVL?
Hello,
If you are thinking of buying holding companies on this basis, there are plenty out there which are traded upto 60-80% discount to market cap of listed subsidiaries.
To name a few: Bombay Bumrah holding Britannia, Vardhman holdings, Haryana fincap etc.
The key is to figure if the value unlocking would happen and turnout in real cashflows which in case of HT, I dont thing would happen. Your argument would hold true if there is any reason for them to sell which is unlikely since why would HT media sell a growing business like HMVL! Also consider if HT starts selling them, share price would fall so the on paper market cap would not be realized in real cash.
If I were to evaluate any business I look at real cash flows at the company levels including dividends from the subsidiaries and some delta.
because all of these businesses that you mentioned are losing money and are a drag on the profitability - the market always like a sharp, focussed profitable business that exists alone without the threat of a drag .
Dear Sulla,
Holding companies are normally available at a discount compared to any successful offshoot of theirs.
Possible reasons
Thanks all for the replies. It really helps.
OutlookBusiness lists HMVL as one of the fastest growing companies. this is the Jan 22 edition.
Don’t think this edition has hit the stands yet.
Thank you. 
Good Results for Q3 posted by HMVL: Highlights: Copy from results presentation:
Total Revenue increased by 12.8% to Rs. 2,516 million
Advertising revenue increased by 19%; Circulation revenue increased by 6.3%
EBITDA increased by 26.8% to Rs. 712 million; EBITDA margins higher at 28.3%
Profit after tax increased by 28.2% to Rs. 469 million; Net Profit margins were higher at 18.6%
Strong balance sheet position with Net Cash of Rs. 6,638 million
EPS for the quarter stood at Rs. 6.38 as compared to Rs. 4.98 in the last year.
Disc: Invested 15% of portfolio…
Very good results from HMVL!!
It is managing to grow pretty fast and deserves better valuation. The only thing that may be holding it back is the huge cash pile of 663cr and management not doing anything with it inspite of their comments. They should have increased the dividend at least.
Positives…
Increase in ad volumes
UP to continue on its growth trajectory and drive margins…specially with elections in UP next year
Discl: No holding yet. Hold Jagran
I think one thing that is affecting valuations of all print media and somewhat to tv news channels is that thier affiliations or leanings towards political parties.
I had earlier invested in SUN TV due to its robust reach in the south however it got slammed for obvious reasons…kalanidhi being brother of dayanidhi and aircel maxis connection.
Disc- Not holding
In the print media, how much market share does un-organized players have? And what are the chances of organized print media companies taking away the market share from un-organized players?
Few points which I could note down from concall
-Q. what was key driver for growth
A. Elections, increase in volume because of festive season. Automible, banking, education growth. political revenues contributed 2-3%.
-Q. Plans for 660Cr cash.
A. Looking out for acquisition.
-Excluding bihar election underlying growth was 14% to 15%.
-No plans for Rajasthan.
-Q. Despite stating in comments that comapny is in good position to raise cash any time why is cash not put to use or returned to shareholders.
A. Directors to decide how to make use of cash.
I was not convinced with the answer given. Since long they have not found any opportunity to acquire any company, so why not return cash to shareholders. It is not easy to find acquisition target in hindi media. And when they find they can raise cash easily.
-60 Cr to be paid to parent company for brand purchase. They did not disclose how much royalty payment will be saved by purchasing the brand. The wanted to keep it with themselves.
-In yield terms will continue to trail behind dainik jagran and will be high than amar ujala
Disc : Holding. But not much convinced with management motives to use cash.
thanks for the notes.
Management commentary on cash is not convincing and the cash keeps building up. This much cash on books can be a negative and management can try to find ingenious ways to misuse it. Below is an extract from kotak report in Jan 2015.
HMVL would ideally be looking for a company: i/ the vernacular space, which is ii/ in the top 3 newspapers in the geography, and iii/with a likely payback period of 4-5 years. With these in mind, and imposing the conditions that: a/ no major listed newspaper publishers are willing to sell, and the possibility of sales from newspapers with political affiliations is low, b/ no #1 in geographies will be willing to sell at reasonable valuations, and c/ valuations paid will not be higher than Rs 1500/ reader (HMVL’s own valuation is closer to Rs.1000/reader), we believe that the possibility of HMVL making a significant acquisition, say that involves an outlay of over Rs 5Bn- Rs 6Bn, becomes very slim.
CONFERENCE CALL - from Capital Markets
Hindustan Media Ventures
Volumes grew significantly due to Bihar election and festival spending
Hindustan Media Ventures held conference call on 27 January 2016 after it declared its December 2015 quarter results.
Vivek Khanna, CEO of the company addressed the call
Highlights of the call:
For the quarter ended December 2015, HMVL registered a 16% growth in sales to Rs 240.89 crore. OPM jumped 560 basis points to 25.0%. Thus OP grew 50% to Rs 60.07 crore. PBT grew 32% to Rs 63.00 crore. Net profit grew 28% to Rs 46.86 crore.
For the nine months ended December 2015, HMVL registered a 12% growth in sales to Rs 691.03 crore. OPM jumped 430 basis points to 24.1%. Thus OP grew 37% to Rs 166.63 crore. PBT grew 35% to Rs 183.51 crore. Net profit grew 31% to Rs 133.60 crore.
During the quarter the company saw 19.2% increase in advertising revenue to Rs 181.20 crore primarily due to increase in advertising volumes.
It saw 6.3% increase in circulation revenue to Rs 54.2 crore due to higher circulation and higher net realization per copy.
The management was pleased to report another quarter where revenue growth was faster than the industry’s.
Growth was powered by a good festive season that fuelled advertising spends across most sectors, state elections in Bihar as well as its internal initiatives.
The management hopes to continue with the good performance for the rest of the year.
Benign raw material prices and operational efficiencies contributed to higher profitability
Growth in advertising and circulation revenues being off-set by a 25.3% increase in employee costs on account of impact of annual increments and hirings and 31.4% increase in sales & promotion costs to support Haldwani launch and higher revenue in the quarter.
Most of the circulation growth was led by Bihar election. However, underlying growth in Circulation revenues of about 14-15% continues.
For the future the company will continue driving both volume and yield growth across geographies on the back of improving economic environment.
The management feels that UP will continue on its growth trajectory and drive margin expansion.
The company will also focus on growing adoption of the new Hindustan app launched in January’2016.
The company continued to build on the momentum of the previous quarters, strengthening its presence in Uttar Pradesh and Uttarakhand while retaining its dominant market position in Bihar and Jharkhand.
The management is confident that the steps it is taking to move to the next level of growth will continue to deliver value to shareholders
Jharkhand and Bihar combined grew at 16%.
6 months ago the company had dropped prices in Bhagalpur and Muzzfarpur. Now the company is getting back to old prices. That is why circulation expansion in revenues was just 6% during the quarter.
Elections in Bihar, full festival season in December 2015 quarter compared part of it in Q3 December 2014 quarter led to increase in volumes.
Auto Banking and finance and education have been the growth category.
Underline growth (despite Bihar election and adding back of DAVP due to code of conduct) is 14-15%.
The newsprint prices have fallen and the company has seen 3% benefit in margins due to this.
Newsprint is expected to be stable in coming few months but dollar increase can hurt the players.
When there are slow down in economy, companies cut down in advertising. But in 2010 when there were strong economic headwinds rural economy was not much impacted. Thus for the immediate future double digit growth is certainly possible.
For yield on the commercial advertising the company is higher than Amar Ujala but it continues to trail behind Dainik Jagran and this would continue to be so for some more time.
Average realization on copies its 2.15-2.18 per copy. As per revenue per copy the company is on the higher side than the industry.
Other revenues have a substantial portion of interest income.
Volumes grew significantly due to Bihar election and festival spending.
85-90% of revenue growth was due to volume.
The company is looking at Rs 28-29 crore as employee cost plus increase in wage inflation.
The company has spend Rs 15 crore till December 2015 quarter and for the full year it will be around Rs 20 crore.
Hindustan is dominant No 1 in Bihar and clear No 1 in Uttarakhand. There is a long way for UP to catch up with Bihar and Jharkhand. In UP the company is the second largest and the fastest growing Daily.
In Jharkhand, Hindustan is No 1 in Readership. It is no. 2 in Delhi
Tax rate for the quarter was lower due to long term gains on treasury. For FY 2016 it should be around 26-27%
The highlight for me was that now UP/UK are equal contributors of co’s revenue. In terms of profitability my guess is UP/UK is still about half of what Bihar & Jharkhand contribute. That can still go up. Only if they increase the payout from 12% to even 15/20% my guess is the stock would fly.
Discl : No Holdings
As has been the case for last few quarters, HMVL continues to perform above industry in ad revenue growth at least. DB posted degrowth/flattish trend for last few quarters in ad revenue and even Jagran ad growth numbers are tepid. So clearly, HMVL is getting it right on account of UP/UT momentum. Also, largely the growth in last 2-3 quarters have come on back of volume growth and I am sure, eventually yield improvement will kick in too.
So, following seems to be the base case to me for next 2 years
Thus, 15% topline growth with 2-3% margin improvement can give very decent bottom line growth. So operationally, it remains a very good bet in print media space
The long pending overhang of cash deployment remains as management has nothing significant to share there. This will surely mean it will command much lower valuation than its peers despite much better business prospects than its peers.
So, the downside again seems limited from hereon (even if HMVL trades at current multiples of 10-12 times) and can provide return in line with earning growth at least. While, if any positive surprises on cash deployment/dividend fructifies, it can get the re-rating in multiples as well.
