Sharekhan is bullish on Network18 Finance and has maintained buy rating on the stock with target price of Rs 651.
Sharekhan Stock Broking firm research report on Network 18
Key points
After the transfer of Studio18.s business to Viacom18, Network18 has filed the amended draft offer document for its rights issue. The old draft document stated the earlier objects of the issue to raise a part of the funds for film projects under Studio18. We maintain our valuation of the right issue at Rs133.6 per share. Network18 proposes to use a part of the rights issue proceeds towards capex on television content production. We believe, the investment in content production business will cater to the content requirements of the forthcoming channels of Viacom18.
HomeShop18 is going great guns with business spreading over 2000, towns and cities across India, and with average sales of approximately 20 lakh per day just a few months after its launch. A full-fledged home shopping channel is in the offing. w Issue of preferential warrants in TV18 and GBN will lead to increase in Network18.s holding in TV18 to 53.3% and in GBN to 45.1%. We maintain our buy recommendation on the stock based on our sum-of-theparts price target of Rs651.
Transfer of Studio 18 to Viacom18
Network18 group announced its plan to enter the Indian general entertainment space through a 50:50 joint venture (JV) with global media conglomerate Viacom Inc. As a part of the arrangement, Network18 group transferred its motion pictures business housed in Studio18 to the venture, while Viacom transferred its three operational channels MTV, VH1 and Nickelodeon India to the JV. After the transfer of Studio18.s business to Viacom18, Network 18 was required to file an amended draft offer document for its proposed rights issue.
Rights issue of PCCPS
Network18 has announced a rights issue of partly convertible cumulative preference shares (PCCPS). As per the terms of the issue, every holder of five equity shares in the company will be entitled to 1 PCCPS. A shareholder entitled to a rights issue of PCCPS on paying Rs200 will be allotted: a) One PCCPS of Rs150, b) One equity share (pari passu to existing equity shares) for the remaining Rs50 and c) One detachable warrant which is convertible into one equity share within 24-48 months of allotment.
The detachable warrant will be convertible at a price determined at a 50% discount (of the average of the weekly high and low of the closing prices during the 90 days immediately preceding the week in which the board informs the exchanges about fixing the record date for warrant exercise period) to the then prevailing price of the warrant. The company is raising Rs205.7 crore through the rights issue for the objects mentioned below. We have evaluated the rights issue at Rs133.6 per share of Network18 (for details refer our stock idea note on Network18 dated June 20, 2007) and thereby believe that it will add value for an existing investor.
Change in objects of rights Issue
Network18 had filed a draft offer document with the Securities and Exchange Board of India for a rights issue of PCCPS to raise ~Rs200 crore. While the terms of the issue remain unchanged, the objects have undergone a change with transfer of the company.s Hindi movie production, acquisition and distribution business to Viacom18.
Valuation and recommendation
Network18 group is on the verge of becoming a media and entertainment conglomerate with presence across verticals. While its business news channels CNBC and Awaaz continue to dominate business news space, the relatively new channels CNN-IBN and IBN-7 continue to maintain a significant market share in the highly competitive general news genre. We expect value unlocking for TV18 shareholders (and in turn Network18 investors) from the proposed listing of Web18 and from value creation from Viacom18.s launch of Hindi general entertainment and other channels.
We believe that while most of Network 18 group.s businesses are in investment mode, the promise a tremendous growth in the fast growing Indian media and entertainment industry and the new media. We maintain our price target of Rs651 for the stock.
Sharekhan Stock Broking firm research report on Network 18
Key points
After the transfer of Studio18.s business to Viacom18, Network18 has filed the amended draft offer document for its rights issue. The old draft document stated the earlier objects of the issue to raise a part of the funds for film projects under Studio18. We maintain our valuation of the right issue at Rs133.6 per share. Network18 proposes to use a part of the rights issue proceeds towards capex on television content production. We believe, the investment in content production business will cater to the content requirements of the forthcoming channels of Viacom18.
HomeShop18 is going great guns with business spreading over 2000, towns and cities across India, and with average sales of approximately 20 lakh per day just a few months after its launch. A full-fledged home shopping channel is in the offing. w Issue of preferential warrants in TV18 and GBN will lead to increase in Network18.s holding in TV18 to 53.3% and in GBN to 45.1%. We maintain our buy recommendation on the stock based on our sum-of-theparts price target of Rs651.
Transfer of Studio 18 to Viacom18
Network18 group announced its plan to enter the Indian general entertainment space through a 50:50 joint venture (JV) with global media conglomerate Viacom Inc. As a part of the arrangement, Network18 group transferred its motion pictures business housed in Studio18 to the venture, while Viacom transferred its three operational channels MTV, VH1 and Nickelodeon India to the JV. After the transfer of Studio18.s business to Viacom18, Network 18 was required to file an amended draft offer document for its proposed rights issue.
Rights issue of PCCPS
Network18 has announced a rights issue of partly convertible cumulative preference shares (PCCPS). As per the terms of the issue, every holder of five equity shares in the company will be entitled to 1 PCCPS. A shareholder entitled to a rights issue of PCCPS on paying Rs200 will be allotted: a) One PCCPS of Rs150, b) One equity share (pari passu to existing equity shares) for the remaining Rs50 and c) One detachable warrant which is convertible into one equity share within 24-48 months of allotment.
The detachable warrant will be convertible at a price determined at a 50% discount (of the average of the weekly high and low of the closing prices during the 90 days immediately preceding the week in which the board informs the exchanges about fixing the record date for warrant exercise period) to the then prevailing price of the warrant. The company is raising Rs205.7 crore through the rights issue for the objects mentioned below. We have evaluated the rights issue at Rs133.6 per share of Network18 (for details refer our stock idea note on Network18 dated June 20, 2007) and thereby believe that it will add value for an existing investor.
Change in objects of rights Issue
Network18 had filed a draft offer document with the Securities and Exchange Board of India for a rights issue of PCCPS to raise ~Rs200 crore. While the terms of the issue remain unchanged, the objects have undergone a change with transfer of the company.s Hindi movie production, acquisition and distribution business to Viacom18.
Valuation and recommendation
Network18 group is on the verge of becoming a media and entertainment conglomerate with presence across verticals. While its business news channels CNBC and Awaaz continue to dominate business news space, the relatively new channels CNN-IBN and IBN-7 continue to maintain a significant market share in the highly competitive general news genre. We expect value unlocking for TV18 shareholders (and in turn Network18 investors) from the proposed listing of Web18 and from value creation from Viacom18.s launch of Hindi general entertainment and other channels.
We believe that while most of Network 18 group.s businesses are in investment mode, the promise a tremendous growth in the fast growing Indian media and entertainment industry and the new media. We maintain our price target of Rs651 for the stock.
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