Hindustan Media Ventures Limted (HMVL)

Disclosure: I hold HMVL and trying to find reasons to either increase or reduce the holding as per available facts in Q4 Results. This note is just to get your critical feedback to improve my learning process.

Questions related to cash in Q4 Concall (either to do a buyback, increasing dividend or doing an inorganic expansion) were responded using `Board is aware and would decide`\ as shield. Definite use of cash does not seems to be a top priority and doubt that would be changing anytime soon. It seems to be influenced by Lack of focus on Capital Allocation as well as value unlocking even by the Parent company H T Media Ltd as mentioned below.

H T Media Ltd : MCap as on 28-05-2016, 1910 Cr.

  1. Net standalone Cash on Books: 135 Crore as per 3rd QTR Concall Transcript
  2. Share of HT Media in the MCap of HMVL: 970 Cr. Logic: 2000 Cr (Mcap of HMVL) * 75% (as HT Media Holds 75% in HMVL) *65% (Holding company discount of 35 %)
  3. As per 3rd quarter Concall, Company has bought 10 FM licenses in Phase III auctions by paying 450 Crores.

Summing up 1, 2 and 3 shows that company has solid assets of 1500+ crores. Also, it runs a businesses in Education, Print, Digital and Radio space which generated Average Net Profit of 126 Cr in last 5 Yrs on standalone basis (FY11 to FY15 – Used screener.in data for the numbers) and market is assigning only 400 Cr valuation to this business (1, 2, 3 are subtracted from the market cap).

Number crunching is an incomplete exercise unless someone with conceptual power (Hitesh Bhai, Ayush, Donald, Dhawnil, Mr D, Mr M, Mr B to name a few …@desaidhwanil, @hitesh2710, @Donald, @ayushmit ) is generous to share their viewpoint.

P.S : As an investor one has to keep a track on business performance (Growth, Margin expansion) which in-turn would lead to share price movement and need to live with Managements style of functioning regarding capital allocation.Is there a way to influence it?

1 Like

Sandesh also has tons of cash on the books. Non-current investment of 159cr in fy15. It is currently quoting at the P/E of 7.3 and market cap of 560cr.

I wonder why newspaper/media companies are hoarding cash? Is it some kind of business compulsion? Because they can influence political environment. They need some kind of buffer.

1 Like

Even though HMVL debt has gone up to 172.74cr, only 13% of its total assets are funded by debt. As far as debt is concerned companies do tend to get hammered even if they assume a little debt. Some debt is good as long as its in proportion. People may not agree with me, but i think HMVL fair value is in the Rs 450 per share (+/- 15%) range, I hope i am proved correct. I hold the stock and I am very happy with the way this company has performed

1 Like

Hi Can someone calculate the steady state value of HMVL please ? It says NOPAT/WACC +excess cash.

NOPAT = Operating Income x (1- Tax Rate (0.25))

Operating Income = Gross Income (818.59) - Operating Expenses(652.1) - Depreciation & Amortization (24.32)

(818.59-652.1-24.32) x (1-0.25)/12 (WACC) +643 (excess cash) =1531 …. is this correct

I have assumed WACC as 12%

From the current market cap, it looks like its valued at minimum potential future potential value creation; there appears to be significant upside. The downside might be limited

Thanks

1 Like

Looks like cash at 10 PE is a liability and hopefully at 15 PE will be an asset for HMVL.:slight_smile:

And thats how markets behave usually.

Cash apart, the main business of newspaper seems to be making inroads in the areas it operates in and there has been consistent growth in topline including circulation and ad revenues.

disc: invested.

11 Likes

Below is weekly chart of HMVL. The stock is close to the trendline where it has taken multiple supports and this should hold

3 Likes

If u see a longer term chart on monthly or weekly time frame, then there is a sort of cup and handle pattern with an upward tilt and a breakout.

It seems a good combination of techno funda pick.

The company should generate free cash flow of around 200 crores every year over next two years. If one takes the market cap currently which is close to 2000 crores then fcf yield to market cap comes to 10% and if one excludes cash of 600 crores plus (we thus get enterprise value of 1400 crores) then fcf yield to EV is around 14%. This is usually present in no growth stories. Here we have a co showing decent top and bottomline growth.

disc: invested.

12 Likes

attached is the chart pattern in HMVL referred to in earlier post.

7 Likes

HMVL is constantly increasing sales and the other positive is its margin expansions . The raw material consumption is 2.7 % increase from the previous year . As it has already mentioned about the quality of paper used in the Hindi daily as to cut down expenses . It’s holding large cash as mentioned earlier there are no opportunities to invest that’s a good point . And ROCE and ROE have been growing I follow EPV and with conservative calc I’m waiting for 450+ with just 11 times earnings and a huge FCF HMVL is a home runner .

Disclaimer : I have been holding the stock from 200 levels

1 Like

Their website - particularly for media outfit - appears to be neglected. The investor section home page has two stories one from 2011 and another 2013.

Nothing has changed with respect to the fundamentals, Its a growing stock but undervalued majorly because there is no clarity of what to do with the amount of cash it has. Once it is clear, the stock should be re-rated to PE of 15-20. When it happens, nobody knows…

I have been trying since long to get in touch with some of the management guys at HMVL to verify if the senior management is really putting efforts to acquire something in the vernacular space as they have been stating repeatedly in concalls,but no luck so far.

Will update the thread if I can get hold of someone.

If the right acquisition happens it would add up to the earnings and the multiples should improve as well.

Disclosure: Invested

It makes sense to be secretive regarding acquisitions. However the real intent is what really matters, of course they cant say it out loud what they will or potentially looking to acquire or that may lead to unfair high valuation expectations by the seller, most important is their willingness. If done properly can give significant boost.

Discl. Invested

it is not very easy to acquire some newspaper. it will take years of
negotiation. I guess management is prudent by holding cash.

disclosure: no holding in any media company

I was going through an interview of promoter Shobhana Bhartia and it does look she has a good insight into this business.

This interview was done in April’13 and back then she was talking about a company which is more of a content provider and now it seems there are forming a separate entity for it which will sell content to HMVL as well as other companies.

Are you saying that Hindustan group is hiving of content business from HMVL and new identity will sell content to HMVL and charge for it?

Going through the Q4 conference transcript it seems this new content management company will be co-owned by HMVL(44%) and HT Media (56%). Part of the employee cost will also move to the new company which will be selling content to both HMVL and HT Media along with other companies.

Content will be sold to HMVL but management clarified that it should not impact their profit.

Hi Chitan

Thanks for bringing-up this point.[quote=“xplorechintan, post:157, topic:991”]
Q4 conference transcript it seems this new content management company will be co-owned by HMVL(44%) and HT Media (56%)
[/quote]

Transcript of Concall for Q4 pasted by @crazymama does not mention anything similar to what you are saying. Can you please mention the source of your info?

The transcript on the company website has the information.

http://www.hmvl.in/report16.html#

1 Like
  • HMVL has released the Hindustan app is via HT Media. On the Google Play store, the app has a 4.1 rating out of 1500+ votes and a total download of 1L - 5L installs. - https://play.google.com/store/apps/details?id=com.hindustan.hindinews&hl=en
  • There are several low ratings which complain that the paper is biased and money minded.
  • The competitor apps - DB & Jainik Jagran has a 4.1 rating out of 60k votes and a total download size of 10L - 50L. Ofcourse, these papers might have a wider reach in other states

Disc : Tracking position