A recent HSBC report on Zee Entertainment Enterprise states that the company's present market price factors in its sports losses and loss from new investments. At present, there are no immediate concerns pertaining to the company.
One of the lucrative factors that work in Zee Entertainment Enterprise's favour is its long established and widely accepted range of channels in the general entertainment channel space, both on national (Hindi) and regional. This gives the company an edge over its peers to negotiate better deals with multi-specialty operators (MSOs) in terms of sharing of revenues.
Also it has distribution tie-up with STAR Mediapro has the advantage of jointly distributing of 66 channels make its reach farther and deeper. For the first 11 weeks of 2013 Zee TV average viewership share was 17.3% in Hindi Speaking markets (HSM) while it was 15.7% in the last 11 weeks of 2012.
The HSBC report believes that this improvement in Zee's ratings is largely attributed to the inclusion of new Less than Class 1 (LC 1) markets by TAM. The company is placed better in terms of penetration in Less than Class 1 (LC1) and this gives it an edge over its peers. The report believes that the company to take its advertisement rates upwards.
On the valuation front, the HSBC reports states, "We value Zee using a DCF approach, assuming a Weighted Average Cost of Capital (WACC) of 11% and a cost of equity of 12% and cost of debt of 10.5% to arrive at our target price of Rs272. We rate the stock Overweight"
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