Eros International Media - Review - Recommendations

[sunil]

KR Choksey Institutional Research has the following Recommendation for the IPO of Eros Entertainment,

Considering potential growth in Film industry and expanding exhibition platform in India, we see strong opportunity for increase in theatrical revenues, thereby providing opportunity for movie content and distribution players. Also we are sanguine about rapid analogue to digital migration and emergence of new digital media platforms which have provided the opportunity to de-risk the movie business model through pre-sale of rights. Eros with 30 years of experience in acquiring movie rights and strong movie distribution network in India is expected to largely benefit. In addition, Eros has partnership agreement with Eros plc which gives ready exposure to international revenues. On upper price band, the issue is price d at 13.8x of consolidated FY11E EPS of Rs 12.6 which is at significant discount compared to its closest peer UTV Software, trading at FY11E P/E of 33x. We recommend a SUBSCRIBE to Eros International Media IPO

[Cher]

Chetan,

What is your opinion about Eros IPO?  This is one name that I have been hearing since my childhood, my gut says go for it.  Please post your views.

Thanks,
Cher

[sunil]

Way2Wealth's Recommendation by Nisha Harchekar about the IPO,

At the lower and upper end of the price band, the issue quotes at P/E of 18-19.4x its FY10 fully diluted earnings of Rs 8.8- 9. ‘Eros’ is a well known brand in the Indian film industry which is one of the largest in the world. According to FICCI-KPMG Report 2010, the Indian film industry is projected to grow at a CAGR of 8.9% between 2009 and 2014 to reach a total market size of Rs 136.7 bn by 2014. Considering the growing prospects of Indian Media and Entertainment
industry and strong business potential along with brand equity that the Company enjoys, we recommend a SUBSCRIBE.

[sunil]

IndiaInfoline has a SUBSCRIBE recommendation on the IPO,

Eros International Media Ltd (EIML), incorporated in Aug, 1994 is part of the Eros group which has been in the entertainment business for over three decades. It is well poised to tap the opportunity presented by Indian Media and Entertainment Industry driven by rising regionalization and digitisation through new distribution platforms like Digital Cable, DTH & IPTV. Distribution and sale of media content online also offers a huge potential for Eros. EMIL sources all Indian film content for the Eros Group and exploits content across formats within India, Nepal and Bhutan. The Eros India library has rights of over 1,000 films, comprising of previously released films and music videos. The international distribution rights for such films (excluding Tamil Language films) are sold to overseas affiliates. It is also engaged in co–production/ production activity. EIML has registered a revenue and PAT CAGR of 58% and 45% over the past 4 years. We recommend investors to ‘SUBSCRIBE’ the issue.

[sunil]

Anand Rathi has a LONG Term Subscribe & the following note

Considering the growing prospects of the Indian media and entertainment sector along with the brand (EROS) recognition, global presence and the films pipeline gives positive outlook for the future of the company. We recommend to Long Tem SUBSCRIBE

[sunil]

HSBC has a SUBSCRIBE recommendation with the following note,

The Indian Film Industry forms one of the most important content feeder systems to the Music, Radio and Television segments of Indian Media & Entertainment industry. The Indian Film industry eclipses Hollywood both in terms of number of films produced and theatrical admissions. The Indian film industry is estimated to grow at a CAGR of 8.9% over next 5 years to reach Rs 136.7bn in FY14. Ancilliary revenue streams is expected to grow at a CAGR of  15.0% to reach Rs 7.1bn in FY14 and Cable & Satellite rights are expected to grow at a CAGR of 15.0% to reach Rs 11.4bn in FY14. The increasing rate of multiplexes and digital screens will improve the distribution reach. Digitization reduces incremental distribution costs as cinemas upload films to computer hard drives, thereby eliminating the need for physical prints to be produced and delivered. Digital prints have enabled distributors to release a large number of copies at the same time, thereby allowing producers to capture revenues outside urban areas and recover their investment more quickly.

EIML is currently valued at 17.9x-19.3x on FY10 EPS of Rs 8.8 and Rs 9.1 based on the price band of Rs 158-175, which is cheaper than that of UTV’s 41.6x and Shree Ashtavinayak’s 96.1x FY10 EPS . Considering the future growth prospects of Indian film industry, valuable content library, better movie pipeline, we believe investors should subscribe to this issue.

[sunil]

HDFC Securities Recommendation on EROS Entertainment,

Compared to its peer UTV Software (which is also into Television, broadcasting, games content etc in addition to film production/distribution), the issue seems expensive on P/E and P/BV basis. UTV’s model is better in as much as its dependence on film production/distribution is not as large as EIML. However lack of options for investors from credible promoters in the films media space could mean that the issue could be looked at favorably. However in case a large gains available on listing, one could evaluate one’s options including exiting the stock completely with a view to relook at it a couple of quarters down the line.

[chetan]

Yes even I have heard a lot about this. Apply for Short Term Gains. Somehow I don't see Consistent Cash Flow in this business and hence Media Stocks don't form a part of my portfolio as we have other cash generating cows :-)

Chetan,

What is your opinion about Eros IPO?  This is one name that I have been hearing since my childhood, my gut says go for it.  Please post your views.

Thanks,
Cher

[sunil]

Angel Broking Analysts Anand Shah, C.Kapur and Sreenakth.P.V..S have the following recommendation,

EIML has a proven track record of robust growth both on the top-line and bottom–line fronts. Going forward, we estimate the company to record revenue and earning CAGR of ~21% and ~29% respectively, over FY2010-12E. At the upper price band of Rs175, EIML is available at 19.4x FY2010 fully diluted EPS of Rs9, which we believe is reasonable given: 1) valuable and diversified content library of over 1,000 titles, 2) de-risked business model - co-productions and acquisition, 3) promising movie pipeline (including 8 big-budget Hindi language films), 4) proven execution skills (has successfully released Om Shanti Om, Love Aaj Kal, Karthik Calling Karthik, etc), and 5) derives synergistic advantages from parent Eros plc.

We have valued EIML at 9x EV/EBITDA and 25% discount to UTV Software, as it is a pure play on movie production/distribution, while UTV Software is a diversified entertainment conglomerate. We have arrived at a fair value of Rs203, translating into ~16% upside from the upper price band. We recommend a Subscribe view to the IPO.

[sunil]

Nirmal Bang has the following recommendation on the IPO,

Based on price of Rs 175 (upper end of the price band) and company’s FY 2010 earnings the company will trade at a P/E multiple of 19.44x which is lower than its peers. Also, company looks attractive in terms of P/BV and EV/Sales multiple given that company is expected to grow at a rapid pace as compared to its peers. The pipeline of movies to be released by Eros over the next two years will contribute to its top line growth as well as enrich its existing content library. The company is in a strong position to maintain a sustained financial performance by leveraging its business model as well as its extensive content library and looks attractive as compared to its peers. Therefore, we recommend SUBSCRIBE to this issue.

[Cher]

Thanks, Chetan.  Will follow your advice and exit at 35 to 40% gain, if alloted any.

Cher