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Zee Entertainment Enterprises Ltd (updated - 23 April 2009)
With advertising revenues coming off by about 7 per cent, Zee Entertainment has turned in a disappointing set of numbers for the March 2009 quarter. Although subscription sales were up, total revenues fell to Rs 513.74 crore. As a result, although costs stayed more or less flat, the operating profit fell to Rs 122 crore.

With the outlook for advertising revenues not too bright in a weak economic environment, 2009-10 could be another difficult year for Zee given that it is now the number three player in the Hindi general entertainment channel (GEC) genre. Advertising in the June 2009 quarter will be impacted somewhat because of the IPL tournament and the elections. The Zee management says it does not want to spend on programming simply to chase rating points and has taken three programmes off the air because they weren’t doing well.

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It claims to have seen an increase in the channel share in the last quarter and currently 32 of it shows are in the top100. Zee plans to focus on trimming costs -including selling and distribution expenses, which were up sharply last year. The ZeeNext channel, which was posting huge losses, it says, is in ‘suspension mode’. While Zee’s revenues grew around 18.5 per cent last year to Rs 2,173 crore,the growth this year could be lower.
source - businessstandard

Zee Entertainment Enterprises Ltd
The Zee Entertainment stock came off by nearly 6 per cent on Thursday. Life has become difficult for the broadcaster since Colors was launched in July last year. Within a few months, it was pushed down from its number two position in the Hindi general entertainment channel (GEC) space.

Now Colors has edged past Star Plus scoring 292 gross rating points compared with 267 for the latter in the week ended April 11, 2009. Typically, advertising follows GRPs with a lag and now that Colors has seen its GRPs sustain and it has established itself among the top two, it should see more advertising coming its way and at higher rates.

For Zee, this could mean a smaller share of the ad pie. Already ad revenues for Zee were up just 2 per cent y-o-y in the December 2008 quarter -non-sports ad revenues actually fell 15 per cent y-oy- and they could well fall in the March 2009 quarter.

The June 2009 quarter will also be difficult with both the elections and IPL expected to eat into the GECspace. As it is with the slowdown in the economy, adspends are expected to grow only at about 6.5 per cent this year, which is about half the growth seen last year. So ad revenues for Zee which are expected to have grown by just 15 per cent last year, could see even lower growth this year. At a price of Rs 128, the stock trades at around 14 times estimated 200-10 earnings and is overvalued.
source - BS

Zee Entertainment Enterprises Ltd (updated - 31 Dec 2009)
Zee Entertainment is undoubtedly in a revamp mood. In the last two months, the company has made moves towards consolidating the group’s general entertainment channels (GEC) under one roof. Under the latest move, the company aims to merge its 50.18 per cent subsidiary, ETC Network, with itself. Here, ETC Network’s broadcasting namely, ETC Music (a Hindi music channel) and ETC Punjabi (a regional entertainment channel), and education businesses will be merged with Zee. Thereafter, the education business will be demerged into a different entity, Zee Learn.

ETC Network’s shareholders will get 10 shares in Zee Entertainment for every 11 shares they hold in ETC; the shares held by Zee will get cancelled. This values ETC at about Rs 230 crore or 26 times its net profit and 3.4 times its sales for the year ended March 2009. The deal valuation looks fair and is in line with the prevailing multiples in the sector.

This move follows the company’s announcement in October 2009 pertaining to the acquisition of six regional entertainment channels from Zee News, which has given the company access to additional 30 million homes and has lead to improved profitability. Financially, even though this acquisition has lead to an 11.3 per cent increase in Zee’s equity, analysts estimate a net accretion of 3-4 per cent to its EPS.

More importantly, the two developments should enhance clarity about the businesses as Zee Entertainment will now emerge as a broadcasting and entertainment player, whereas Zee Learn will focus on the education business .

At a later date, Zee Learn is expected to be listed separately, a move that could lead to some value unlocking for shareholders of the company. Meanwhile, shareholders (of Zee and ETC) will get one share of Zee Learn for every four shares they hold in Zee Entertainment. Zee Learn will have the child education and youth vocational training businesses under its fold. While this business is small in size -it reported revenues of Rs 15.9 crore and EBIDTA of Rs 70 lakh for the six months ended September 2009 - there is huge potential for growth. Hence, its future growth strategy and a separate listing will be crucial in deciding the quantum of value creation, going ahead.

Overall, the advantage of the latest exercise is to improve clarity over the different business verticals. Financially though, there is nothing significant to speak about. ETC Network reported revenues of Rs 66.6 crore and net profit of Rs 8.6 crore, which is just three per cent of the Zee Entertainment’s consolidated revenues and 1.7 per cent of net profit for year ending March 2009.
Meanwhile, Zee Entertainment has been doing well. Recently, its market share (of viewership) has increased and is now around 18 per cent. Its advertisement revenues have also been looking up which along with cost cutting measures have boosted the company’s profitability.

However, at Rs 260, the stock is trading at about 27 times its 2010-11 estimated earnings, where analysts believe there is little room for appreciation in the near-term.
source - BS