Radhakishan Damani aka RK Damani maintains a studied silence on all issues concerning his investments. In fact, the only time the legend has been seen and heard is in the video taken on the occasion of Rakesh Jhunjhunwala’s 50th Birthday celebrations.
However, the maestro’s actions speak louder than words.
We got a glimpse of Radhakishan Damani’s awesome clairvoyance in January 2014 when he scooped up a truckload of logistics stocks, Gati and TCS. We must remember that at that time, nobody wanted to touch logistics stocks even with a 10-ft barge pole. Today, investors are falling over each other in a desperate bid to get their hands on logistics stocks, giving Radhakishan Damani multi-bagger profits.
Will TV Today Network script a similar success story?
Radhakishan Damani has made it explicit that he is very bullish about the stock. He (and his companies, Derive Trading Pvt. Ltd & Damani Estates & Finance Pvt. Ltd) already hold a chunk of 25,17,540 shares (4.22%) shares of TV Today. A few days ago, when the stock price slumped over lukewarm Q2FY15 results, Damani rushed in and bought another chunk of 13,00,000 shares. His total holding is now 38,17,540 shares, constituting 6.40% of its equity.
We must note that several other stock wizards are also bullish about media stocks. Ramesh Damani has declared that digitization will be a “game changer” for the entire Industry. Rakesh Jhunjhunwala (and also Radhakishan Damani) hold a huge chunk of TV18 Broadcast. Nandita Parkar of Karma Capital has also stated that the “Media and entertainment” is her favorite sector because it “is on the cusp of change due to digitization”.
ICICIDirect has conducted an in-depth study of TV Today’s Q2FY15 results. While they have reduced the target price to Rs. 276 from Rs. 300, they recommend a buy on the basis that:
“Subscription revenues to remain stable, high operating leverage to kick in
With digitisation in phase III and IV cities, TV Today would be able to better monetise its reach as it enjoys a far stronger position in the smaller cities and towns in the Hindi speaking belt. However, with a delay in shift towards digitisation, we have built in a nominal growth of 7.2% in this revenue stream. We expect the subscription revenues to reach Rs. 38.2 crore by FY16E from Rs. 33.2 crore in FY14. The fixed nature of operational cost provides high operating leverage, which is already reflected in 216% growth in EBITDA with 24.6% revenue growth in FY14. Going ahead, with a reduction in carriage costs, we expect EBITDA and PAT CAGR (FY14-16E) of 30.7% and 33.7% to | 186.6 and Rs. 109.6 crore, respectively.
Enjoys the No-1 position since decades, Maintian BUY
Digitisation would lead to declining carriage cost & uptick in subscription revenue as the distribution industry shifts to cost per subscriber (CPS) model. Carriage cost forming about 30-35% of revenue is expected to decline at an annual rate of 10% over the next two years. Though the employee expenses has led to some trimming of EBITDA, we expect the company to post a 30.7% EBITDA CAGR (FY14-16E) to Rs. 186.6 crore. With a revival in EBITDA margins, valuation multiples are expected to inch up to historical levels. We to value it at 15x FY16E EPS of Rs. 18.4 to arrive at a revised target price of Rs. 276, maintaining Buy“.