Few updates of last 3 -4 months:
Positives -
- Movie business should not make losses as Balaji has clarified in multiple interviews that they will not do movies. Rather any new idea will be channeled into ALT platform - unless the idea is extremely compelling to make a movie on it
- TV business in FY 2017 did PAT of 32 cr. Which is great. Clearly it is a cash cow. At 20 p/e multiple we can value TV serial business at c. 640 cr. Management said that this business will grow at 20 - 25% annually.
- Cash in books at c. 250 cr.
So even if no upside from ALT - the business is valued at 640 cr (TV) + 250 cr (cash) = 890 cr = current market cap roughly.
So downside protected in my view.
ALT -
Can have significant upside if they fix three things;
- APP TECH ISSUES
- STICK TO TIMELINE of new web-series release
- improve on the COMEDY QUALITY
Nevertheless positives of the ALT are:
- Cheap pricing
- 32 web series / year is awesome – so volume is good - this means high room for error. Even if some web-series are waste, other good ones will continue to attract subscribers
- Movie type production quality
- Variety of web series
- Dramas quality
- Roping famous movie stars such as Nimrat Kaur
- Almost a monopoly as no other production house producing so much Indian oriented content
- Already 2.5 mn plus downloads and aiming 1.5 - 2 mn paid subscribers by FY 2018
- Strong marketing and advertisement focus
- Management focus and capital spend on ALT is very encouraging
- And regularly meeting analysts/strategic investors. A tie up with investor / fund raise at higher per share price than CMP can be a good positive
So 250 cr cash + TV business cash cow throwing ~30 cr cash annually is enough to produce content for next three years and fix tech related issues!
So low downside with strong upside potential (which we are still not paying for).
To watch in the till FY 2018 - Do they release 20 more new web-series; do they fix tech issues; paid subscriber numbers. First till will drive the last one. Thanks
Invested!