Radio City 91.1 (Music Broadcast Ltd) IPO Subscribe Recommendation
Posted: Fri Mar 03, 2017 10:57 pm
IPO NOTE
Music Broadcast Ltd. – Subscribe
Issue Opens: 06-Mar-17, Issue Closes: 08-Mar-17, Price Band: Rs.324-333
Music broadcast Ltd. (MBL), the first private FM radio broadcaster in India, operates its radio stations under the brand ‘Radio City’ (91.1). The company commenced operations in 2001 in four cities and gradually expanded its presence in 37 cities. MBL will be trading at EV/EBITDA of 22.1x (after adjusting for IPO proceeds) which is similar to the only listed player in the given space i.e. ENIL. On P/E front, the company will be trading at 26.7x P/E of FY16 (pre-listing) on adjusted PAT compared to ENIL’s 39.8x. MBL did not pay any tax in FY16 owing to accumulated losses, however all the loss is expected to be set-off in FY17. Consequently, PAT margin is expected to come down from FY18 and based on the current IPO price of Rs.333, the stock should trade at a P/E closer to ENIL. Compared to ENIL, the stock is trading at reasonable valuations. It’s available at a ROCE of 21.1% of FY16. Although the stock does not look all that promising on a relative valuation basis, our long-term outlook on the radio industry of the M&E space remains positive, which is likely to grow at 16.9% CAGR over CY15-20E. Based on its poplar content, strong sales capability, the advantage of the existing JPL relationship with advertisers, and expansion into new geographies, we are upbeat on the IPO. Long term investors seeking to add weight in the M&E sector should subscribe to the issue.
Music Broadcast Ltd. – Subscribe
Issue Opens: 06-Mar-17, Issue Closes: 08-Mar-17, Price Band: Rs.324-333
Music broadcast Ltd. (MBL), the first private FM radio broadcaster in India, operates its radio stations under the brand ‘Radio City’ (91.1). The company commenced operations in 2001 in four cities and gradually expanded its presence in 37 cities. MBL will be trading at EV/EBITDA of 22.1x (after adjusting for IPO proceeds) which is similar to the only listed player in the given space i.e. ENIL. On P/E front, the company will be trading at 26.7x P/E of FY16 (pre-listing) on adjusted PAT compared to ENIL’s 39.8x. MBL did not pay any tax in FY16 owing to accumulated losses, however all the loss is expected to be set-off in FY17. Consequently, PAT margin is expected to come down from FY18 and based on the current IPO price of Rs.333, the stock should trade at a P/E closer to ENIL. Compared to ENIL, the stock is trading at reasonable valuations. It’s available at a ROCE of 21.1% of FY16. Although the stock does not look all that promising on a relative valuation basis, our long-term outlook on the radio industry of the M&E space remains positive, which is likely to grow at 16.9% CAGR over CY15-20E. Based on its poplar content, strong sales capability, the advantage of the existing JPL relationship with advertisers, and expansion into new geographies, we are upbeat on the IPO. Long term investors seeking to add weight in the M&E sector should subscribe to the issue.