Sandesh Ltd. - A Rare Cash-Rich


(Sridhar) #21

Sandesh posted decent results

Q2Fy16 Revenue - 90.4cr against 84 of Q2FY15
EBITDA - 29cr against 22cr
NP - 19.8cr against 13.6


(indirachitra) #22

As regards the media valuation this has shown consistency can some body high light about the scalability of the media segment of Sandesh because it seems the regional vernacular media is poised for a better growth than the English media
There was a big land deal between Sandesh real estate division and Shivalik construction for the prime property in sp ring road any info please
Thirdly anybody from Ahmedabad can please post the stage occupancy level of applewood township
My doubt is the real estate division has started showing growth in this qtr whether it will shown sustainable growth
There outdoor advereṭing model growth with this in mind my question is does it still look cheap at present M.cap because in this sector this is the only company with nil debt and opm of above 35% and huge investment in reality and still quoting less than 6 EVEBITA
Any seniors pl throw some light


(adrian007) #23

See the news in Ahmedabad mirror
Quote
It is a deal that the realty market of Ahmedabad needed to shake off the sentiment of stagnancy it has been mired in for a long time now. Once paperwork is completed, the expected rate of Rs 1 lakh a sq yard for a plot next to Iskcon Circle on SG Highway promises to make it the most expensive deal in the city so far. According to sources close to the development, “City-based realty firms Shivalik Projects and Shilp Infrastructure have bought the 8,000 sq yard plot, right at the corner of Iskon circle. The news has boosted the sentiment of the prevailing stagnant realty market.”

Post Vibrant Gujarat summit, this is the first landmark deal that may cross the Rs 100-crore mark. According to realty experts, prior to this deal NS Safal bought Kedar Bungalows, spread over 18,000 sq yard, at Rs 90,000 sq yard a year ago. This makes the Big Bazaar land deal the biggest on SG Highway. The property earlier had HN Safal and Goyal and Company as partners. After buying their stakes, Sandesh Group sold the property to Shivalik Group two days back. Sandesh Group MD Parthiv Patel, who looks after the real estate division, said "Yes we have sold our land to Shivalk Projects and Shilp Group.

However, we won’t be able to comment on the deal’s amount as it is still under negotiation." Sources in the realty market said that the companies - Shivalik Projects and Shilp Infrastructure - have given the token amount to Sandesh Group towards finalising the deal and rest of the amount will be given in parts as per the terms and conditions finalised on paper. When contacted, Shivalik Projects Managing Director Chitrak Shah said, “We have bought the plot from Sandesh Group and are planning to come up with a state-of-theart commercial project.”

On the buzz of the deal being the most expensive on SG Highway, Shah said, “We are working on the project cost and other factors which will decide the final price of the plot. So, it is difficult to share the per sq yard price of the land deal. But we agree that it is a landmark deal so far as ‘per sq yard’ rate is concerned.” The piece of land next to the BRTS corridor and right on SG Highway. Shivalk Group will be getting floor space index (FSI) of four to construct the building which is an advantage to the developer. Therefore, the deal is noteworthy for Ahmedabad’s real estate market.

National Association of Realtors vice president Pravin Bavadiya said, “Being one of the biggest deals on SG Highway, in terms of price and strategic location, it will boost the sentiments of the realtors in the market.” Considering the strategic location and market value of the property, Bavadiya added, the deal should be around Rs 100 crore. At the time when Ahmedabad real estate market is struggling with the stagnancy, the deal will give sense of relief to many developers, anticipating revival of the real estate market in near future."
Unquote
The apple wood town ship is worth around 320 cr investment wise for Sandesh group and s P ring road is developing very fast
With this in mind what could the the valuavation that is the big question


(Gaurav Agarwal) #24
  1. Company is debt free. Long term debt = 0, Short term debt = 18 cr

  2. Company has good amount of cash on the books. Non-current Investment = 208 cr, Cash = 57 cr & Current Investment = 19 cr

  3. Revenue is growing at around 10% and net profit is growing at 24%

Stock looks under-valued. The stock offers a very good margin of safety at current market price. The company has strong brand and competitive position in the market and good future growth outlook.


(Gaurav Agarwal) #25

Sandesh recommendation on MoneyControl. Watch video here.

Transcript of video pasted from the site below -

SP Tulsian of sptulsian.com told CNBC-TV18, " Sandesh is a largest Guajarati media company and they are publishing seven editions from Gujarat and Maharashtra and their recent foray about a decade back is in Maharashtra and all the seven editions are published simultaneously from Gujarat and Maharashtra and apart from that they own a Guajarati channel Sandesh News.

It's a 90 year old company." "We all have been hunting for growth in the stock and this is a company which has shown a growth of 40 percent on the operating margin in first half of H1 FY'16 over whole of FY'15.

However, the best part I like about the company is its Rs 350 crore topline company, FY'15 had an income of Rs 350 crore, of that 60 percent comes from advertisement income. I have not seen that in any print company getting that kind of product mix, 60 percent and the revenue circulation income is only 25 percent and apart from that the surplus fund which they have of about Rs 300-350 crore is giving them a consistent annuity income of about Rs 50 crore or maybe Rs 40-45 crore on account of interest and all that.

So this is the product mix and for whole of FY'15, they had a profit after tax (PAT) of Rs 55 crore. They are earning huge amount by way of dividend interest, it is a debt free company and they have a cash of Rs 300-350 crore, so FY'15 topline is Rs 350 crore, PAT of Rs 55 crore and EPS of Rs 75," he said. "H1 margin has risen to 33 percent from whole of 25 percent for FY'15. If you see the results, operating profit for first half was at Rs 60 crore against comparable Rs 43 crore for the same period last year, resulting into PAT rising to Rs 40 crore against Rs 27 crore. First half EPS was at Rs 53; I wouldn't be surprised to see the EPS for FY'16 at Rs 95-100, may be I am expecting that to be at about Rs 401 because they have a regular stream of income which you can easily extrapolate, so it is EPS of Rs 100.

However, for FY'17, I will not be surprised to see an EPS of about Rs 115-120." "On financials, they have very small equity of less than Rs 8 crore, promoter stake of 75 percent and it is a 90 year old company, so you have the loyal investors, 15 percent stake is held by the old investors.

They have one group company Applewood Estate which seems to be the real estate company. I couldn't lay my hands on the financials of that company but they have given Rs 175 crore to that company, not as free of cost - that is by way of debentures on which they are regularly earn income otherwise, generally companies park their surplus funds into the group company where those companies start making profits for their personal gain of directors etc. So I presume if Applewood is paying interest that must have accrued huge value which will get unlocked, if not now maybe in next five years maybe in next ten years but I am just seeing the prudent deployment of the surplus fund by the company in the group."

"Net worth of Rs 500 crore can get rised to Rs 600-650 crore in next one year and the marketcap is Rs 650 crore. So virtually you are getting 90 year old print media house at a price to book of Rs 1.3. So taking all this into consideration I like this stock very much and one can take a target of Rs 1,100 in the next six months also."


(Gaurav Agarwal) #26

Sandesh recommended by FirstCall Research. Read full research report here.


(Gaurav Agarwal) #27

Excellent set of results by Sandesh.

Revenue 371cr against 344cr last year. Up 8%.
Net Profit 80cr against 57cr last year. Up 40%

Long term Debt = 0
Short term Debt = 14
Non-current Investment (NCI) = 213cr
Cash = 125cr
Current Investment (CI) = 41cr

NCI + Cash + CI (Cash Equivalent) = 379
Market Capitalization of Sandesh as on 30-May-16 (MCap) = 572

Cash Equivalent as percentage of MCap = 66%

How compelling does this investment look?

Benjamin Grahman help! Why efficient market theory does not work??


(indirachitra) #28

Gaurav Add 78 cr non current investment in mf and 70 cr net block and reduction in inventory and short term loan.
The important thing earlier the market was hesitant because if you see the cash flow 73 24 and 27 cr in last three financial year but this year the operating cash flow is approx 130 cr and three year rev cagr > 8 %and profit cagr > 15 % and the ROE > 15% ROCE > 25%. The second impor taṅt thing the growth has come from the media segment and finance segment is normal were the capital is more and the real estate segment were 209 cr is invested as debentures in apple woods estate a subsidiary real estate company will start giving some income in coming years.
The market was waiting for the cash flow improvement and sustained growth now that is visibly seen from operating cash huge jump and as per BG theory we have found a good potential investment were at present cmp our investment is safe now leave the rerating to the market it will happen very soon see the delivery volumes


(adrian007) #29

Can somebody explain in layman terms why even after such a good result and with asset and cash backing and 90 yr history Sandesh ltd is trading at less than 8 PE.
is it unnoticed or is it the fair value how to calculate this iam confused because I thought atleast 10 PE is good but don’t know why still trading cheap. Anybody throw some light please


#30

One reason I can think of is that although cash rich, the company is not returning cash to investors by way of higher dividends. Some of the cash is being reinvested in the group’s real-estate concern. How the shareholders of sandesh will benefit on those investments is yet to be seen. Having said that, the downside risk seems minimal. May be experts can shed some more light.


(Gaurav Agarwal) #31

@prakash123

Since we have no guidance from the management and annual report is not yet published.

Assuming the following,

I. Revenue growth = 8%
II. Net Profit growth = 25%
III. No equity dilution


(prakash123) #32

Gaurav I read this book of John greenbalt were he emphasised on earnings yield with that I went to the screener I found this stock to match that philosophy
See even at today price of 800 the enterprise value is 485 cr which comes to 4 EVEBITA and the earning yield is 25% and assuming the m.cap to be at 750 cr the enterprise value is 645 cr operating profit of 125 cr the EVEBITA 5 and the PE Will be 10.
At the present EBIT/ enterprise value the EARNING YIELD IS 25% and at 750 cr m.cap and EV OF 645 the EARNING YIELD IS 20%
Even on taking the media alone the revenue is 341 cr and operating profit is 95 Cr and the net profit is 58 cr on media alone even if media segment to be valued at 10 EVEBITA this comes to 950 cr
Or even on market cap to sales of 2 it is 700 cr without finance segment
Now the current investment and non current investment comes to nearly 110 which I have not considered
On finance segment there is 300 cr which is fetching around 29 cr operating profit and 21 cr net profit. This at least we can give a 50 cr m.cap
Lastly 209 cr investment in debentures in the real estate
The sales growth has consistently above 8% profit growth above 15% this time is above 30% even if take the total balance sheet value as asset which is 637 cr and net profit 81 the return on the total assets is above 12.5% the Roce is consistent above 30% the return on equity this Fy is 15%.
The growth factor is 6 P SCORE IS 9 and Alt Z score is 6 and modified c score 1 the current book value is 700.
No debt 90 yr history the mangement is conservative in rewarding dividend but have never given negative result in last many years.
Finally if they decide to merge the Sandesh procon Pvt. Ltd with the parent company the same way they merged Sandesh digital that value unlocking has huge potential.
Now for an enterprise value of just 485 cr backed by asset and cash and equity of more than 880 cr there can be very limited down side from here and even assuming a fare EVEBITA of 5/6 the market cap should be above 750/850 cr
I think you have found a good deal. If I missed some thing I request senior to high light please.
Disl. Invested


(amit anam) #33

I&B Ministry frames New Print Media Advertisement policy

Policy to focus on Transparency and Equity in release of Government ads


(adrian007) #34

The recent stock axis report on M& E sector

Media & Entertainment (M&E) Industry: The Sunrise Sector Of India
The year 2016/17 is considered to be an inflection point for the Indian Media & Entertainment (M&E) industry. It has now positioned itself on the cusp of a strong phase of growth backed by digitization and increased consumer demand. Following are the key triggers that we think will make M&E the sunrise sector of our economic growth:

Summary:

The Indian M&E industry which is valued at close to $20 Billion is expected to reach $29-30 Billion by 2019 and more than $62-63 Billion by 2025. This year, it registered a growth of close to 13.5% over its value in 2015.
The industry is divided into 9 segments. Their growth since the past 6 years and the future prospects are as follows:
$ Billion FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E FY20E CAGR
Television 4.96 5.58 6.29 7.17 8.18 9.31 10.71 12.42 14.44 16.56 12.81%
Print 3.15 3.38 3.67 3.97 4.28 4.60 4.97 5.37 5.79 6.22 7.04%
Films 1.40 1.70 1.89 1.91 2.09 2.39 2.63 2.87 3.14 3.43 9.37%
Radio 0.17 0.19 0.22 0.26 0.30 0.35 0.43 0.49 0.57 0.65 14.35%
Digital Advertising 0.23 0.33 0.45 0.66 0.91 1.22 1.71 2.31 3.01 3.85 32.55%
Music 0.14 0.16 0.14 0.15 0.16 0.18 0.21 0.24 0.28 0.31 8.27%
Out-Of-Home Advertising 0.27 0.27 0.29 0.33 0.37 0.43 0.48 0.53 0.60 0.68 9.68%
Animation 0.47 0.53 0.60 0.68 0.77 0.88 1.01 1.18 1.38 1.63 13.24%
Gaming 0.20 0.23 0.29 0.35 0.40 0.46 0.52 0.59 0.68 0.76 14.28%
Total 10.99 12.38 13.85 15.47 17.45 19.84 22.67 26.01 29.88 34.10 11.99%
Television continues to dominate the M&E industry, with almost 50% of the total market share; the reason being increase in the number of TV Households over the years. The number increased from 168 Million in 2014 to 175 Million in 2015, i.e. close to 70% of the total households in India. India is the second largest television market in the world, after China. Have a look at the television industry growth, which is divided into two sectors:
$ Billion 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E
Subscription Revenue 3.21 3.70 4.24 4.83 5.45 6.14 7.06 8.27 9.61 11.06
Advertising Revenue 1.75 1.89 2.05 2.34 2.73 3.17 3.65 4.16 4.83 5.51
Total 4.96 5.58 6.29 7.17 8.18 9.31 10.71 12.43 14.44 16.57
Out of the total households mentioned above, 145 Million are Cable & Satellite subscribers (C&S) which implies a penetration of 83% and is expected to grow to 87% by 2020.
The total number of transactions in the industry decreased from 61 deals worth $ 2.38 Billion in 2014 to 57 deals worth $1.20 Billion in 2015. The reason for this huge difference in the total deal value is the acquisition of Network 18 Media & Investments Ltd. and TV 18 Broadcast Ltd. by Reliance Industries Ltd in 2014 for around $1.42 Billion.
Growth Drivers:

India has around 500 Million unique mobile users which is likely to become 1.3 Billion by 2020. Currently, around 200 Million have access to internet and this number is set to increase with the introduction of 3G and 4G services.
In a market like India, which is not yet blessed with high data speeds, as of now, 2G users are important too. However, with increasing choices in smartphone selection and the pace at which the smartphone penetration is growing, it is expected that by 2020, all handsets sold will be atleast 4G ready. Also, the rise in app downloads in the recent times have increased the revenue from paid apps from around $145 Million in 2014 to $250 Million in 2015.
India will witness more than 2x growth in the average household incomes from around $8000 currently to $18500 by 2020. This will help the industry to a great extent as a significant portion of the mobile users are in the lower half of the socio-economic pyramid who provide an Average Revenue Per User (ARPU) of just Rs. 120 per month. Hence, an increase in the spending power will definitely increase the ARPU in India and enable its users to explore other applications like email and browsers more, apart from Facebook and Whatsapp.
The Information & Broadcasting (I&B) ministry completed the rollout of digital cable set top boxes in phases I and II.
The phase I digitization covered the four metropolitan cities of Delhi, Mumbai, Kolkata and Chennai.
Phase II covered 38 cities across India which seeded 12 Million set top boxes in all.
Phase III, whose deadline was extended from 30th Sept 2014 to 31st Dec 2015 covered all the remaining urban areas in India.
Phase IV, whose deadline too was extended to 31st Dec 2016 will cover all the remaining households in India
This will increase the relevant consumer base by a great extent thereby facilitating increase in advertisement revenues and reach.
Government Subsidy & Initiatives:

Television
DTH Satellite: FDI raised to 100% from 74%
Cable Network: FDI raised to 100% from 49%
News Channels: FDI raised to 49% from 26%
Cable Network: FDI raised to 100% from 49%
No restriction on FDI in uplinking and downlinking of TV Channels apart from news channels
The government has allotted around $50 Million in the current Five-Year-Plan for various development projects in the film industry. The funds will be utilized to set up a centre for excellence in animation, gaming and visual effects among others.
The Indian and Canadian governments have signed an audio-visual co-production deal that would help producers from both countries to explore their technical, creative, artistic, financial and marketing resources for co-productions, and subsequently, lead to exchange of culture and art amongst them. A similar agreement is under negotiation with the Republic of Korea.
The Government has also given licenses to 45 new news and entertainment channels in India. Star, Sony, Viacom and Zee are amongst those who have received these licenses.
Print
Newspapers & Periodicals: FDI stands at 26%
Foreign Magazines (Indian Edition): FDI stands at26%
Scientific & Technical Journals: FDI stands at 100%
The Union Budget 2016-17 has proposed basic custom duty exemption on news printing. The customs duty on the wood in chips or particles for manufacture of paper, paperboard and newsprint has been reduced to 0% from 5%.
Films
100% FDI through automatic route
Given the industry status to the films segment
With GST expected to pass in the monsoon session, entertainment tax will be subsumed in GST thereby creating a uniform tax rate regime and reduce the burden and complexity.
Radio
FDI raised to 49% from 26%
This will bring in global expertise, innovation and better programming. Also, private players are now allowed to own multiple channels in a city provided they don’t exceed 40% of the total channels.
The third round of Phase III radio channel auction, which was delayed for 2 years, finally got the green signal and will enable as many as 839 new FM radio channels to go on air in nearly 300 cities by the end of the year. This is expected to earn close to $390 Million for the government too.
Other Major Developments:

Last week, Reliance Entertainment today sold majority stake in film and television studio IM Global to Los Angeles-based Tang Media Partners (TMP) for $200 Million.
Eros Now, the digital over-the-top distribution service of Eros International Ltd., has expanded the availability of its service to the Apple TV platform, which will allow the former to showcase its repository of media across Apple TV’s presence in 80 key countries.
PVR Ltd. recently acquired operations of 32 screens of DLF’s cinema exhibition business, DT Cinemas for around $64.5 Million.
What to expect next:

With the FDI limit raised in many of the segments in the M&E industry, global giants like Comcast, 21st Century Fox, Time Warner Cable, Liberty Media Corporation, etc are set to invest in their Indian peers or even set up headquarters in India. From April 2000-June 2015, the FDI inflows in the information and broadcasting (I&B) sector (including print media) stood at more than $4.3 Billion.
Also, India is set to have the youngest population in the world in the next 4-5 years. Internet will then become the new television and online music the new radio. The revenue from advertising is expected to grow at a CAGR of 13% and will exceed $ 12.29 Billion. Hence, there is no doubt that the Indian M&E sector, particularly the Digital Advertising segment (expected to grow at a CAGR of 32.55% 2011-2020E) will be a happy place to be invested in and can be rightfully called the sunrise sector of India.
Have a look at the performances of some of stocks in the M&E industry in the last three months:

We are pleased to say that out of the above mentioned stocks, we have already recommended Shemaroo Entertainment Ltd. and PVR Ltd. to our subscribers apart from two other open calls in the M&E industry.

Lastly, one can, without any doubt say that the Indian M&E industry has witnessed tremendous growth in the last few years and this momentum is expected to continue in the future as shown in the table. Although it faces some tax and regulatory issues, with our government’s positive stance and approach on making business easy in India, it can be safely assumed that M&E has many more miles to go!
P.s. It is a free circulation report and hence reproduced v


(prakash123) #35

Adrian there is one more point I got clarified this time when I went to Ahmedabad I had a look at the balance sheet filing of apple woods estate ltd the BS does not have any long term debt the money that is 225 cr from Sandesh is shown as compulsory fully convertible debenture at the market price and it is due for conversion in fy 18 and fy 17 and nearly 20% is held by Sandesh as equity capital apart from the debenture and apple woods estate shows a reserve of 300 cr and 100 cr short term debt and remaining 300 cr investment the interesting is the the inventory higher at around more than 600 .r without any debt and now they have started selling the villas and the commercial complex is also will be completed now recently I noticed in Apple wood estate ad they are clearly mentioning as Sandesh group company so either there will be an amalgamation in near future which will boost the fixed asset side of Sandesh by 400 cr and the profit from real estate is an additional extra to the media income and the media is also getting big additional income from the OOH side and the television is picking up nicely there digital advertising is far better than the competition so I think we can expect a very good result this fy and fy 18 one two quarter does not make any difference but I think this is purely a value buy for longterm basis we will be able to get a good and better a multi fold return if held with for long term basis and as far the mangement is concerned they have a very clean history of more than 50 yrs anb the second generation promoters are also professional and ethical and aggressive also. I my view a good mangement is a paramount importance for longterm holding and this fits the bill properly.


(Gaurav Agarwal) #36

@prakash123

Details of Non-current investment of Sandesh from Annual Report 2015. Sandesh hold 15.5% FCCD of Applewood estate and equity share.


(amit anam) #37

17 Aug 2016 18:40Sandesh Ltd has informed BSE that the Company have acquired more than 5% (five per cent) equity shares / voting rights in M/s. Applewoods Estate Private Limited.


(Gaurav Agarwal) #38

Have a look at disclosure here.

2,93,558 equity share of Applewood upon conversion of FCCB.
Equity share of 10 each @ premium of 6,741/-

No mention of how many FCCB has been converted.


(Saji John) #39

@Gaurav_Agarwal thanks for pointing out the development. I had invested in Sandesh as a short term opportunity looking at it’s valuations and possibility of appreciation as the realty turns around and it’s radio/OOH business realizes its potential. Will you consider it to be a long term bet? How do you assess the present development? Thanks


(Gaurav Agarwal) #40

@sajijohn

Shares issued on conversion of FCCB = 2,93,558
Sharers already issues to Sandesh as per AR2015 = 1,58,168

Total shares hold by Sandesh = 4,51,726 which according to disclosure is 21.45% of equity of Applewoold.

@6751/shares. This values Applewood at 1422cr.

Now we need to judge if this valuation is in favor of Sandesh Shareholder.