SUN TV NETWORK FY13
ART #1: Key financial insights
Contingent liabilities shoot up:
Sun TV Network's (SUNTV)
contingent liabilities jumped 3.7x from INR0.7b in FY11 to
INR2.7b in FY13. From 3.2% of net worth in FY11, contingent
liabilities increased to 9.5% of net worth in FY13, mainly driven
by additional customs duty demand of INR611m (~6% of FY13
PBT). We believe that the customs duty demand could be on
account of disallowance of exemptions claimed for the purchase
of aircraft - in FY13, SUNTV sold its old aircraft for INR1.9b and
purchased a new one for INR2.95b.
Exposure to promoter group companies:
Exposure to promoter
group companies stood at INR1.9b (6.8% of FY13 net worth), of
which INR1b pertains to trade receivables from Sun Direct, which
had a negative net worth of INR4.9b on FY12 end.
Sun Direct pulls up overall receivable days:
SUNTV receivable
days increased from 93 in FY12 to 104 in FY13 primarily due to
receivable days from Sun Direct increasing from 141 to 198.
Receivables position deteriorates:
Receivables outstanding for
more than six months grew ~67% from INR250m (4.9% of net
receivables) in FY12 to INR417m (7.2% of net receivables) in
FY13. Provision for doubtful debts jumped from INR19.7m (0.2%
of PBT) in FY12 to INR244.4m (2.4% of PBT) in FY13.
the
ART
of annual report analysis
Contingent liabilities
shoot up primarily due
to customs duty
demand, possibly on
aircraft purchase
Sun Direct pulls up
receivable days; has
reported average loss
of INR4b per year
Directors' remuneration accounts for
11% of PBT and 57% of employee cost
Stock Info
Bloomberg
CMP
Equity Shares (m)
M.Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel.Perf.(%)
SUNTV IN
391
394.1
154.1/2.5
494/324
1/-10/-19
A
NNUAL
R
EPORT
T
HREADBARE
13 March 2014
Financial summary (INR b)
Y/E Mar
Revenue
Revenue gr. (%)
EBITDA
EBITDA margin (%)
PAT
EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
Payout (%)
2011
20.2
39.1
15.9
78.8
7.7
19.5
48.1
57.2
37.2
44.8
2012
18.7
-7.7
14.3
77.7
6.9
17.6
-9.8
63.7
29.1
54.0
2013
19.5
4.6
14.4
74.8
7.1
18.0
2.2
70.7
26.8
53.3
ART #2: Accounting/Auditing issues
Policy for amortization of film and broadcasting rights:
SUNTV
considers film/broadcasting rights acquired as intangible assets
and follows a conservative policy of amortizing the rights on
the date of first telecast. Zee, however, treats the rights as
inventory and provides amortization over 3-5 years (except
programs like reality shows, chat shows, current affairs, game
shows, sports rights, etc, which are fully expensed on telecast).
Shareholding pattern (%)
As on
Promoter
Domestic Inst
Foreign
Others
Dec-13
75.0
2.1
15.7
7.2
Sep-13
75.0
2.3
16.2
6.5
Dec-12
77.0
2.2
13.8
7.0
ART #3: Corporate governance matters
Directors' remuneration:
Directors' remuneration for FY13 was
INR1.1b. In each of the last three years, directors' remuneration
was ~6% of total revenue and 11% of PBT. Managerial
remuneration accounted for 57% of employee cost in FY13. This
appears high when compared to Zee's managerial remuneration
of INR56m in FY13 (1.6% of employee cost, 0.5% of PBT and 0.2%
of revenue).
6.25% promoters' shares pledged:
Despite the company being
cash rich, SUNTV's promoters have pledged 18.5m equity shares,
that is, 6.25% of their total shareholding. This could have been
to raise resources for group companies.
Stock performance (1 year)
ART
will present a threadbare portrait of annual reports - statistical, strategic and structured. We believe
ART's
wide canvas - from accounting and auditing issues to
operating performance to management insights to governance matters - will help readers paint a clearer picture of the stock's investment worthiness.
Ashish Gupta
(Ashish.Gupta@MotilalOswal.com); +91 22 3982 5544
Chaitanya Arora
(Chaitanya.Arora@MotilalOswal.com); +91 22 3982 4927
Investors are advised to refer through disclosures made at the end of the Research Report.
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