With the proposed merger of Videocon and Dish TV set to happen very soon, digitization and installation of set-top boxes in homes, the increasing demand for HD quality channels, and growth in the number of PayTV channels, are bringing the focus on to DTH (Direct-to-Home) service providers.
The combined reach of analog cable, digital cable and DTH was estimated to be 152 mn in 2016 of which DTH accounts for 62 million. By 2025, the total market size will increase to 183 million with a proportionately larger growth in DTH segment.
The ongoing cable TV digitisation is expected to raise the average revenue per user (ARPU) for pay channels from $3.3 in 2016 to $4.5 in 2025.
Amidst this digitisation wave in broadcasting, here is a look at the prospects of major players in DTH segment.
Dish TV India Ltd (BSE: 532839 NSE:DISHTV) Category: Mid Cap
Dish TV India Ltd, incorporated in 1988, is a division of Zee Entertainment Group and has now emerged as the world’s third largest DTH company. It uses three satellites to beam quality High Definition and Standard Definition (SD) videos.
It uses the services of NSS6 satellite at 95.0 degree E and ASIASAT both specifically designed for DTH. It has automatic level control feature that helps in trouble free viewing even during adverse weather conditions. Led by Jawahar Lal Goel, a pioneer in DTH services, this trend setting company has a vision to provide unmatched service experience to viewers. The company had recently launched the card-less HD Set-top box called DishNXT HD and aims to provide HD access to all its customers.
Dish TV is to be merged with Videocon on a 55:45 basis, and this will make the new firm Dish TV Videocon Ltd the largest DTH firm in the country. Dish TV has 15.5 mn subscribers while Videocon has 12.2 mn and the merger will make it the largest player in DTH segment.
Dish TV has reported a loss of Rs 13.94 cr for June quarter while sales fell 4.98% to Rs 738.88 cr. On a returns basis, 3.52% quarterly compares well with peers while longer term yields have been negative.
It scores well on return on equity at 22.27%, assets of 2.66%, net profit margin of 3.62%, but fares poorly on liquidity and cash flow ratios. Promoters hold 61% stake. It is trading at a Price Earnings (PE) multiple of 89.88 and seems to be overvalued by the market.
On technical charts, Relative Strength Index (RSI) of 45.71 indicates bearish trend, while MACD line has witnessed a cross over and stochastic indicators are in oversold territory while average directional index (ADX) of 23 denotes range bound trading. It is trading near to 50 DMA. A head and shoulders pattern has emerged suggesting a consolidation at present levels before moving up.
Target: 88 Duration: 3 weeks Strategy: Hold/Buy
Hathway Cable & Datacom Ltd (BSE:533162 NSE: Hathway) Category: Midcap
Hathway Cable & Datacom provides cable TV services in 140 cities and towns and provides broadband internet services. Hathway’s HD boxes support 7.1 channels of surround sound giving the viewer a theatre-like experience.
In the June quarter, it earned a net profit of Rs 27.16 cr while sales fell 57.18% to Rs 128.90 cr. It doesn’t score well on return on equity, but net profit margin is better compared to peers while liquidity and cash flow ratios are not encouraging. Promoters hold 43.48% stake.
On technical charts, RSI of 31 indicates bearishness, MACD line has witnessed a bearish cross over while ADX of 37 indicates uptrend. Stochastic indicator of 15 indicates bearish oversold position. Prices are trending below the 50 DMA of 32.41.
Target : 40 Duration 3 weeks Strategy: Hold/Buy
SITI Networks Ltd (BSE: 532795 NSE: SITINET) Category: Mid Cap
Siti Networks Ltd, a multi system operator (MSO) was established in 2006 by the promoters of Zee Entertainment Ltd, Essel Group. The company infused Rs 1500 mn in 2016-17 to boost infrastructure.
In the June quarter, net profits fell 71.78% to Rs 15.13 cr, while sales rose 30.83% to Rs 364.96 cr. On a returns basis, one month return of 2.41% compares well with peers but quarterly and six month returns are negative. On financial ratios, it doesn’t score well on return on equity and assets, but better net profit margin but disappointing liquidity and cash flow ratios. Promoters hold 59.48%.
On an annual basis, the company reported 18% growth in revenue at Rs 1,204 cr- Subscription revenue Rs 569 cr,carriage revenue Rs 300 cr and broadband revenue Rs 97 cr . It extended its reach to 230 more locations, adding 2.1 mn subscribers.
On technical charts, RSI of 51 denotes neutral to bearish trend, while ADX of 28 denotes range bound trading, stochastic indicator of 29.52 signifies bearish trend, while MACD line has witnessed a crossover indicating a possible uptrend. Prices are close to 50 DMA.
Target: 30 Duration: 3 weeks Strategy: Hold/sell
Den Networks Ltd (BSE:533137 NSE: DEN) Category: Small Cap
Den Networks Ltd, a multi system operator headquartered in New Delhi, was incorporated in 2007 and provides digital cable access to 13 million households in the country spread across 13 key states and 433 cities.
The company has reported a net loss of Rs 10.11 cr in the June quarter, while the annual figures for year ended March 2017 had lowered the net loss to Rs 189.57 cr while net debt was brought down to Rs 181 cr. Cable subscription revenues had gone up by 33% in 2016-17. The company was able to bring down overall costs to Rs 1321.19 cr, a fall of 1.8%.
On a returns perspective, 12.7% quarterly and 6.8% half yearly was commendable compared to peers, while return on equity, net profit margin, cash flow and liquidity ratios aren’t encouraging.
On technical charts, RSI of 48.71 indicates neutral to bearish trend while ADX of 25 denotes range bound trading, MACD had witnessed a bearish crossing. Stochastic indictor of 31 denotes bearishness. Prices are trending just above the 50 DMA of 86.45.
Target: 100 Duration : 4 weeks Strategy: Buy/Hold
The DTH industry is witnessing a rapid growth thanks to increased demand for HD video and surround sound effects. The Tariff and Interconnect Order 2017 will rationalise the costs and give viewers more choice in the selection of channels for viewing.
Impact of Tariff and Interconnect Order 2017- more choice to customers and more revenue expected for multi system operators. According to analysts, proportionately higher growth is going to happen in DTH segment compared to analog and digital cable TV operators. However, accumulated debt, lower ARPU and stiff competition are the issues major players have to contend with.
Presently, a bit bearish, the DTH counter is expected to bounce back once the financial indicators appear positive.