Media outlook for 2015

Transcription

MARKET UPDATE
Poland | Media | 11-December-2014
Polish Media
Media outlook for 2015
Polish ad market spending reached PLN 5.1bn in 9M14, +2.6% yoy.
GDP, domestic demand and private consumption have all performed
relatively well since the beginning of 2014 and they are the main
factors affecting advertisers’ confidence. As a result, we expect
Polish ad market dynamics to remain positive in 4Q14E, +4% overall,
with internet returning to a leading position, +8% yoy, followed by
TV and radio (both +6% yoy). This would imply 2.9% growth for the
whole ad market in FY2014E. When looking at 2015E, we expect the
total ad market to grow by 4.7%, with outdoor as the fastestgrowing segment at +10%, internet at +8%, TV at +6.5%, radio at
+4%, cinema at +2% and press at -11.6%. We see some interesting
potential catalysts for the media market ahead, including: (1) the
outcome of TVN’s possible sale; (2) consolidation of the internet
advertising market; (3) Parliamentary & Presidential elections; and
(4) discussions surrounding new media and allocation of MUX. We
maintain our BUY rating on TVN and increase our FV by 24% to PLN
17.9, from PLN 14.5. We also reiterate our BUY on Agora with FV of
PLN 10.3 (from PLN 10.2).
TV: We expect TV to remain the dominant ad channel in Poland (ca. 50% stake
in the pie) despite the increasing power of the internet. We expect
fragmentation (payTV and DTT thematic channels) to dilute the audience
share of the biggest TV channels but so far TV groups have managed this
issue by launching their own thematic channels.
Internet: We expect internet to remain the fastest-growing ad channel in
Poland as it enables a high degree of personalization and segmentation,
increasing the effectiveness of ads. We see increasing competition between the
two biggest internet portals, Onet.pl and Wirtualna Polska WP.pl. as well as the
beginnings of a consolidation process (WP.pl recently acquired the
dobreprogramy.pl and money.pl thematic portals while Onet.pl acquired NK.pl).
TVN
BUY
PLN 17.90
Bloomberg ticker
Share Price
Market Capitalisation
Free Float
TVN PW
PLN 15.70
PLN 5,298.27m
46%
PLN m Y/E 31-Dec
2012A
2013A
2014E
2015E
Revenues
1584.0
1586.3
1617.2
1744.7
EBITDA
455.8
404.1
558.5
627.1
EBIT
374.0
328.9
485.1
555.4
adj. net income
227.9
(144.7)
237.7
322.7
Net debt
EPS (PLN)
1820.2
1.4
2123.6
(0.5)
1891.9
0.7
1786.5
1.0
DPS (PLN)
0.1
0.6
0.0
0.0
Agora
BUY
32% upside
Fair Value
PLN 10.30
Bloomberg ticker
Share Price
Free Float
PLN m Y/E 31-Dec
Revenues
EBITDA
EBIT
AGO PW
PLN 7.78
PLN 396.29m
61%
2012A
1138.6
2013A
1073.9
2014E
1081.1
2015E
1113.0
80.8
103.5
88.8
81.9
(13.0)
7.4
(7.2)
(12.9)
(10.8)
Net income
(8.9)
0.5
(4.0)
Net debt
(21.3)
(29.3)
(12.4)
22.3
EPS
(0.2)
0.0
(0.1)
(0.2)
All share price data as at close on 9-Dec-2014
Source: BESI Research, Company Data, Bloomberg
Press: Copy sales in the press segment are on a structural downward curve
that has nothing to do with cyclicality. However, we also see some signs of a
slowdown related to the declining base. Agora’s copy sales declined again in
October, -10% YoY.
Radio: We think radio should remain a stable ad channel, not affected by
major structural changes with stable ca. 8% share in ad market.
Outdoor: The performance of outdoor advertising in 2015 should be
determined by mostly by Presidential & Parliamentary elections where we
expect total ad budget at PLN 80m (1% of total ad market), where historically
ca. 30% pertained to outdoor adding an incremental ca. PLN 24m revenues in
2015E (ca. 5% of total outdoor) Agora, with a ca. 32% market share, should be
among the biggest beneficiaries (we exp incremental PLN 9m revs and PLN
1.5m, EBITDA in 2015E).
Cinema: The performance of the cinema segment, both in terms of admissions
and ad revenues, is primarily determined by the movie line-up. So far 2014
looks like a good year, with ticket sales +6.4% yoy in 9M14. Good ticket sales
for “Bogowie” and the release of the 2nd part of The Hobbit bode well for
4Q14 and we expect a record-high of 39m admissions in FY14; however, given
this high base, we would expect 2015 to be flat at best.
NOT FOR DISTRIBUTION TO ANY US PERSON OR TO ANY PERSON
OR ADDRESS IN THE UNITED STATES OF AMERICA
(v1.0.8.0)
14% upside
Fair Value
Polish ad market outlook
Along with Poland’s GDP, the Polish ad market has been going through a
recovery since the beginning of 2014. According to Starlink, a media research
house, in 9M14 Polish ad market spending reached PLN 5.1bn, up by 2.6% yoy.
Internet remains the fastest-growing ad channel, up 6.5% YoY in 9M14, but TV
is close behind at +6.3%, followed by radio at 5.8%. Outdoor dropped by 4.2%,
cinema by 9.4% and press by 14.8%, while magazines fell by 12.5% and dailies
by 18.9%.
In 3Q14, TV was the fastest-growing ad channel, up by +9.6% YoY, outpacing
internet with a +6.5% YoY dynamic. This is the strongest quarterly growth for
these segments observed since at least 2002, when this data first started
being collected. In our view this raises the question of whether this might be
the first sign of an internet ad segment hiccup. However, we think the strong
performance of TV in 3Q14 reflects a combination of elements. Recent
sporting events like the Winter Olympics in Sochi and World Cup in Brazil are
the most important, as they were broadcast exclusively on public TV with
predefined ad air-time dedicated to event sponsors. Hence, TV ad budgets
built up and when the Autumn TV season came around they were unlocked,
increasing growth in the TV ad segment to almost a double-digit pace.
Figure 1
Polish ad market vs GDP
Figure 2
25.0%
8.0%
25.0%
20.0%
7.0%
20.0%
15.0%
6.0%
10.0%
5.0%
5.0%
Polish ad market vs domestic demand & private consumption
10.0%
8.0%
15.0%
6.0%
10.0%
5.0%
4.0%
0.0%
2.0%
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
0.0%
-5.0%
3.0%
-5.0%
2.0%
-10.0%
0.0%
-10.0%
-15.0%
1.0%
-15.0%
-20.0%
0.0%
-20.0%
Polish ad market
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
4.0%
-2.0%
-4.0%
GDP
Polish ad market
Source: BESI Research, GUS
Private consumption
Domestic demand
Source: BESI Research, GUS
GDP, domestic demand and private consumption have all performed relatively
well since the beginning of 2014 and they are the main elements affecting
advertisers’ confidence. As a result, we expect dynamics in the Polish ad market
to remain positive in 4Q14E, +4% overall, with internet returning to a leading
position at +8% yoy, followed by TV and radio (both +6% yoy), cinema and
outdoor (both +5%) and press at -12%. This would imply 2.9% growth for the
whole ad market in FY2014E. We see internet as the fastest growing segment in
FY14E at +6.9%, followed by TV at +6.2%, radio at +5.9%, outdoor at -1.6%,
cinema at -2.6% and press at -13.9% (magazines -11.8% and dailies at -17.9%).
Figure 3
Polish ad market – YoY PLN m change by segment
Figure 4
Polish ad market – CAGR dynamics
200
15%
150
10%
100
5%
50
0%
0
TV
-50
-5%
-100
-10%
-150
press
internet
radio
outdoor
cinema
total ad
market
-15%
Source: BESI Research, Company Data
3Q14
4Q14E
2Q14
press
1Q14
4Q13
TV
3Q13
2Q13
1Q13
4Q12
internet
3Q12
2Q12
1Q12
radio
4Q11
3Q11
2Q11
outdoor
1Q11
4Q10
2Q10
1Q10
-200
3Q10
cinema
-20%
CAGR 08-13
CAGR 13-16E
Page 2 of 30
When looking at 2015E, we expect the total ad market to grow by 4.7%, with
outdoor as the fastest growing segment at +10% (thanks to Parliamentary
elections), internet at +8%, TV at +6.5%, radio at +4%, cinema at +2% and
press at -11.6% (magazines -10% and dailies at -15%).
Figure 5
Polish ad market, PLN m
Figure 6
9 000
100%
8 000
90%
7 000
80%
6 000
70%
Polish ad market, structure
60%
5 000
50%
4 000
40%
3 000
30%
2 000
20%
1 000
10%
0
0%
2005
cinema
outdoor
radio
internet
press
TV
2006
cinema
2007
2008
outdoor
2009
2010
radio
2011
2012
internet
2013 2014E 2015E 2016E
press
TV
In 2015, there are no big sporting events potentially boosting the ad market.
On the other hand, Poland will see two major elections: Presidential and
Parliamentary.
Figure 7
Media budgets in political elections in Poland
140
120
100
80
60
40
20
0
2011
2007
2010
Parliamentary
2005
Presidential
total media budget (PLN m)
2009
2010
EU
2006
Municipal
media promotion budget (PLN m)
Source: BESI Research, PKW
Parliamentary elections are the most expensive of all political elections in
Poland. In 2011, mass media promotion reached PLN 52m and in the prior
election in 2007 it reached PLN 60m. Despite their nationwide scope,
Presidential elections are less than a third as expensive as Parliamentary
elections in terms of advertising spending.
Figure 8
Ad mix in Polish elections
Presidential - 2010
Parliamentary - 2011
radio
5%
internet
9%
TV
35%
press
17%
radio
3%
press
3%
internet
14%
TV
52%
outdoor
28%
outdoor
34%
Source: BESI Research, PKW
Page 3 of 30
In 2015, we expect elections to add ca. PLN 80m to the ad market (+ ca. 1pp of
growth), with the highest spending in the outdoor, TV, internet and press
segments.
TV – 2015 outlook
Keeping in mind the high TV consumption in Poland (ca. 250 min/day), very
high payTV penetration (ca. 70%+ households) and Poland’s population density
and distribution (rural areas without access to many forms of entertainment),
we expect TV to remain the dominant ad channel (ca. 50% stake in the pie)
despite the increasing power of the internet. We maintain our view that growth
in internet is and will be at the expense of falling press, not TV.
Figure 9
TV segment
Figure 10 TV segment
4 500
60.0%
4 000
50.0%
3 500
1 400
30%
1 200
25%
20%
1 000
3 000
15%
40.0%
2 500
30.0%
2 000
1 500
20.0%
800
10%
600
5%
0%
400
-5%
1 000
10.0%
200
-10%
500
0
0.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E
TV - PLN m
-15%
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
0
TV - PLN m
TV - % of total ad market
TV - YoY change
We note the increasing popularity of over-the-top (OTT) services like Ipla.tv,
Player.pl and VOD.pl, but for now we see OTT as an incremental service used
in addition to regular payTV. A good example can be seen in the US, which is
the biggest market for Netflix, one of the biggest worldwide OTT services.
Despite Netflix’s rapidly growing base, payTV providers like DirecTV are also
growing their client base and ARPUs.
Figure 11
TV audience of biggest TV groups
Figure 12 TV audience of biggest TV groups
100%
100%
90%
90%
80%
80%
70%
70%
60%
60%
50%
50%
40%
40%
30%
30%
20%
others
TVP Group
TVN Group
Polsat Group
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
Jan-12
Jul-11
Oct-11
Apr-11
Jan-11
Jul-10
Oct-10
Apr-10
Jan-10
Jul-09
Oct-09
Apr-09
Jan-09
Jul-08
Oct-08
10%
Apr-08
20%
0%
Jan-08
10%
0%
2008
2009
others
2010
2011
TVP Group
2012
2013
TVN Group
2014E
2015E
2016E
Polsat Group
TV audience share is also affected by fragmentation of the market and DTT
switchover (in the TV ad segment, the contribution of thematic channels
increased by 19% yoy in 2013 while that of general channels dropped by 10%
yoy). We expect thematic channels to gain popularity, but the biggest TV
groups like Polsat and TVN have already managed this issue by launching their
own thematic channels. For example, TVN closed its TVN CNBC business
channel and replaced it with TVN24 Biznes I Swiat.
Page 4 of 30
Figure 13 TVN Group – TV audience share
Figure 14 Polsat Group – TV audience share
25%
25%
20%
20%
15%
15%
10%
10%
5%
5%
0%
0%
2008
2009
2010
2011
TVN - thematic channels
2012
2013
2014E
2008
2015E
TVN - main channel
2009
2010
2011
Polsat - thematic channels
2012
2013
2014E
2015E
Polsat - main channel
On the other hand, Polsat successfully acquired TV4 and TV6, which are
gaining momentum. In 2014, TV audience share was further supported by
Polsat’s volleyball channels, which were exclusively dedicated to broadcasting
the Volleyball WorldCup.
Figure 15 Stopklatka TV
Figure 16 Stopklatka TV
Stopklatka TV - TV audience, 4+
1.00%
60,000
0.90%
Stopklatka TV - TV audience, 16-49
1.00%
25,000
0.90%
50,000
0.80%
0.70%
40,000
0.60%
0.80%
20,000
0.70%
0.60%
0.50%
30,000
0.40%
20,000
0.30%
0.20%
10,000
0.10%
15,000
0.50%
0.40%
10,000
0.30%
0.20%
5,000
0.10%
0.00%
0
Mar-14
Apr-14
May-14
AMR 4+
Jun-14
SHR 4+
Jul-14
0.00%
0
Mar-14
Apr-14
May-14
AMR 16-49
Jun-14
Jul-14
SHR% 16-49
We see two additional factors potentially affecting the TV ad market: the
distribution of remaining TV multiplexes (MUX) and a change in the media law.
However, we do not expect any major decisions to be made in 2015.
Regarding MUX, some of the potential ideas under discussion are: (1) create
space for more DTT thematic channels; (2) keep the existing number of
channels unchanged and dedicate the remaining MUXes to existing channels
to upgrade them to HD standard; (3) dedicate MUX for telecom services.
Public TV is promoting the idea of dedicating MUX purely for TVP channels.
Private TV companies are strongly opposed as it would monopolize the
market. Private TV broadcasters are also against the idea of creating more
DTT TV channels as diluting TV audience share would not cover the high cost
of DTT TV transmission.
Regarding the media law, there has been a proposal to switch media
monthly/yearly payments into a media tax to be paid by households together
with the electricity bill. However, in light of the upcoming Parliamentary and
Presidential elections, we would not expect any substantial discussion of
additional taxes before early 2016.
Internet – 2015 outlook
Internet should remain the fastest growing ad channel in Poland as it enables a
high degree of personalization and segmentation, which increases the
effectiveness of internet ads. We expect the internet ad market to grow by 8%
in 2015E and in the following years.
Page 5 of 30
Figure 17 Internet segment
Figure 18 Internet segment
2 000
25.0%
1 800
1 600
20.0%
500
140%
450
120%
400
100%
350
1 400
1 200
15.0%
1 000
800
10.0%
300
80%
250
60%
200
40%
150
600
20%
100
400
5.0%
200
0%
50
0
0.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E
Internet - PLN m
-20%
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
0
Internet - PLN m
Internet - % of total ad market
Internet - YoY change
Currently we see increasing competition between the two biggest internet
portals, Onet.pl and Wirtualna Polska WP.pl as well as the beginnings of a
consolidation process. WP.pl recently acquired the dobreprogramy.pl and
money.pl thematic portals while Onet.pl acquired NK.pl. The main idea behind
this is to increase the real user base of each internet group in order to improve
the company’s negotiating position with advertisers. Adding thematic portals
also allows it to develop e-commerce services based on which internet group
it can monetize.
Figure 19 Real users of biggest internet portals
Figure 20 Reach of biggest internet portals
25,000,000
90%
80%
20,000,000
70%
60%
15,000,000
50%
40%
10,000,000
30%
20%
5,000,000
10%
0
0%
Internet
Grupa Gazeta.pl
Grupa Onet.pl
Grupa Interia.pl
Grupa Wirtualna Polska
Grupa O2.pl
Grupa Onet.pl
Grupa Interia.pl
Grupa Wirtualna Polska
Grupa O2.pl
Grupa Gazeta.pl
Press – 2015 outlook
We maintain our view that copy sales in the press segment are on a structural
downward curve, which has nothing to do with cyclicality. Consumers are
shifting from printed to digital media.
Figure 21 Copy sales of nationwide dailies
Figure 22 Copy sales of nationwide dailies, YoY
600 000
20%
10%
500 000
0%
400 000
-10%
300 000
-20%
-30%
200 000
-40%
100 000
-50%
Gazeta Wyborcza
Dziennik
Rzeczpospolita
Fakt
Super Express
-60%
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
0
Gazeta Wyborcza
Dziennik
Rzeczpospolita
Fakt
Super Express
Page 6 of 30
However, we see some signs of a slowdown related to the declining base as
well. Agora’s copy sales declined yet again in October, by 10% YoY.
Figure 23 Gazeta Wyborcza – copy sales, YoY dynamic
30%
Gazeta Wyborcza - copy sales YoY (%)
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
Gazeta Wyborcza
We expect the press ad segment to decline by 11.6% in 2015E and by -8%/-9%
in the following years.
Figure 24 Press segment
Figure 25 Press segment
2 500
40.0%
700
35.0%
600
30.0%
500
15%
10%
2 000
5%
0%
25.0%
1 500
20.0%
1 000
15.0%
400
-5%
300
-10%
-15%
200
-20%
10.0%
500
100
-25%
5.0%
0
0.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E
Press - PLN m
-30%
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
0
Press - PLN m
Press - % of total ad market
Press - YoY change
Among press sub-sectors, we expect the greatest decline in dailies, at -15% in
2015E and -12% and -10% in 2016E and 2017E, respectively.
Figure 26 Dailies segment
Figure 27 Dailies segment
1 200
18.0%
400
16.0%
350
14.0%
300
12.0%
250
10.0%
200
1 000
800
600
8.0%
400
6.0%
4.0%
200
20%
10%
0%
-10%
150
-20%
100
-30%
50
2.0%
0.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E
Dailies - PLN m
-40%
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
0
0
Dailies - PLN m
Dailies - % of total ad market
Dailies - YoY change
We expect the magazines ad segment to decline -10% in 2015E and by -8% in
both 2016E and 2017E. The main reason for the differing dynamics between
dailies and magazines is that the former have a very short lifecycle and can be
easily replaced with web content, whereas magazines usually include higherquality content and photos. We think consumers still treat magazines as a
form of entertainment, whereas dailies are viewed more as a commodity easily
replaced by the internet.
Page 7 of 30
Figure 28 Magazines segment
Figure 29 Magazines segment
1 200
1 000
20.0%
400
15%
18.0%
350
10%
300
5%
250
0%
200
-5%
8.0%
150
-10%
6.0%
100
-15%
4.0%
50
-20%
0
-25%
16.0%
14.0%
800
600
10.0%
400
200
2.0%
0
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
12.0%
0.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E
Magazines - PLN m
Magazines - PLN m
Magazines - % of total ad market
Maagzines - YoY change
Outdoor – 2015 outlook
The political parties still have not commented on their ad spending in the
European and Municipal elections held in 2014. Comments from media
companies indicate that ad budgets for these elections were a bit lower than
in previous years. During the 3Q14 results conference call, Agora’s CEO
hypothesized that political parties may have refrained from heavy ad spending
in 2014 so as to build up their budgets for the upcoming 2015 elections.
Looking at examples from past Parliamentary and Presidential elections, we
expect the 2015E ad market to be supported by ca. PLN 80m in incremental
ad spending, where ca. PLN 60m should come from Parliamentary elections
and ca. PLN 20m from Presidential elections. Looking at the spending mix
between different ad segments shown in Figure 8, where outdoor accounted
for 34% of Parliamentary and 28% of Presidential in the last election (vs its
usual ad market share at 6-7%), we expect outdoor to be supported by ca.
PLN 24m in incremental revenues in 2015E, which accounts for 5% of total
annual outdoor ad spending.
Figure 30 Outdoor segment
Figure 31 Outdoor segment
800
10.0%
250
40%
9.0%
700
8.0%
30%
200
600
20%
7.0%
500
6.0%
400
150
10%
5.0%
4.0%
300
0%
100
-10%
3.0%
50
200
2.0%
1.0%
0
0.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E
Outdoor - PLN m
-20%
0
-30%
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
100
Outdoor - PLN m
Outdoor - % of total ad market
Outdoor - YoY change
AMS, Agora’s outdoor advertising subsidiary, is the biggest market player in
Poland, with the most outdoor media displays at almost 24k, or ca. 44% of the
total outdoor market. More importantly, as of 2013 AMS is the market leader in
citylights and backlights displays, with a ca. 65% market share.
Page 8 of 30
Figure 32 Outdoor market - traditional formats
Figure 33 Outdoor market – citylights & lightning formats
80,000
49%
70,000
48%
60,000
47%
50,000
46%
40,000
45%
30,000
44%
20,000
43%
10,000
42%
25,000
66%
64%
20,000
62%
15,000
60%
10,000
58%
5,000
0
0
41%
2009
2010
others
2011
AMS
2012
56%
54%
2009
2013
2010
others
AMS share
2011
AMS
2012
2013
AMS share
This is important because citylights and backlights are more advanced
outdoor display formats located in bigger cities. AMS’ high share in the
citylights format and the decreasing popularity of the traditional outdoor
format mean that AMS has outperformed the broad outdoor market recently.
AMS’ presence in the outdoor format should soon increase further thanks to
the Warsaw Project, which entails the construction of 1580 citylight displays in
bus shelters in Warsaw over 2014-2016 with total capex at PLN 80m.
Figure 34 Agora – outdoor screens
Figure 35 Agora – outdoor ad market share
26 500
40.0%
26 000
35.0%
25 500
30.0%
25 000
25.0%
24 500
24 000
20.0%
23 500
15.0%
23 000
10.0%
22 500
5.0%
22 000
0.0%
21 500
Radio – 2015 outlook
We think radio should remain a stable ad channel, not affected by major
structural changes. The clear advantages of radio are a stable audience and
lower cost than TV. As can be seen in the chart below, a slight reduction in
radio’s share of the Polish ad market, from ca. 8.5% in 2005 to 8% in 2014E, is
not a result of a decline in absolute terms (as radio ad spending increased to
PLN 575m in 2014E from PLN 480m in 2005) but rather a more rapid increase
in the broader Polish ad market.
Figure 36 Radio segment
Figure 37 Radio segment
700
9.0%
250
40%
8.0%
600
7.0%
30%
200
20%
500
6.0%
400
5.0%
300
4.0%
150
10%
0%
100
3.0%
200
2.0%
100
-10%
50
-20%
1.0%
0.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E
Radio - PLN m
Radio - % of total ad market
-30%
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
0
0
Radio - PLN m
Radio - YoY change
Page 9 of 30
Cinema – 2015 outlook
The performance of the cinema segment, both in terms of admissions and ad
revenues, is primarily determined by the movie line-up. 2014 looks to be a
good year in terms of cinema admissions in Poland as in 9M14 ticket sales
reached 27.4mm, +6% YoY. In 3Q14 alone, ticket sales reached 8.2m, -1.1% YoY.
We expect 4Q14 to be good as well, supported by very good sales for the
movies “Bogowie” (so far ca. 2m tickets sold), “Miasto44” (ca. 1.7m tickets
sold), “Sluzby Specjalne (ca. 0.5m tickets sold) and The Hobbit, which will
launch just after Christmas. As a result, after a 5.6% ticket sales decline in 2013
to 36.3m, we expect 39m in 2014E, scoring 7.4% growth. We expect ticket
sales of 11.6m in 4Q14E alone (+11.5% yoy).
Figure 38 Cinema ticket sales in Poland (mn)
40
35
30
25
20
15
10
5
2014E
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
0
The cinema ad segment, although growing, still represents ca. 1% of the total
ad market. In 4Q14, because of abovementioned good performance of Polish
movies and expected good opening sales for The Hobbit, we expect the
cinema ad market to grow by 10% yoy. In 2015E and the following years, we
expect cinema ad revenues to grow by ca. 2%.
Figure 39 Cinema segment
Figure 40 Cinema segment
140
120
1.8%
45
1.6%
40
1.4%
35
1.2%
30
60%
40%
20%
100
80
1.0%
60
0.8%
0.6%
40
25
0%
20
-20%
15
-40%
10
0.4%
-60%
5
20
0.2%
0
0
-80%
0.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E
Cinema - PLN m
Cinema - % of total ad market
Cinema - PLN m
Cinema - YoY change
Page 10 of 30
MARKET UPDATE
Poland | Media | Large Cap | 11-December-2014
TVN
Attractive TV asset
Despite strong competition and TV ad market fragmentation, TVN
remains a major TV platform in Poland, defending TV audience share
of ca. 22% and with TV ad market leadership of ca. 33% in 3Q14.
TVN’s controlling shareholders, ITI and Canal+, are currently
analysing potential exit options and Time Warner and Discovery are
among the potential buyers, according to TVN’s CEO. We think
acquiring the TVN asset could present a unique opportunity for a
strategic investor considering entering the media market in CEE due
to Poland’s large domestic market, TV’s position in the ad pie, and
TVN’s content and market share. We would therefore expect a
potential acquirer to pay a premium to current international TV
multiples (BBG 14E/15E EV/EBITDA 11.3x/9.8x), which then could be
recovered by post-acquisition synergies mostly in the area of lower
TV content costs. We maintain our BUY rating and increase our FV
to PLN 17.9 (from PLN 14.5) on the back of: (1) lower capex over the
forecast period; and (2) lower WACC. We have trimmed our 14E/15E
EBITDA forecasts by 8%/7% on lower exp for associates.
ITI and Canal+ consider exit option: We think the sale of TVN by ITI and Canal+
would offer a unique opportunity for a global media company looking to enter
the Polish ad market. We estimate the value of the market at ca. PLN 7.5bn pa.
Of this, TV accounts for ca. 50%, with payTV penetration in Poland among the
highest in the EU at ca. 75%. Ad spending per capita in Poland is at USD 67 vs
USD 146 in the Czech Rep. and USD 85 in Hungary in 2013. We think this gap is
very wide (probably too wide) considering Poland’s GDP growth prospects
and the strength of domestic demand. In our view, a controlling stake in TVN,
which would give a potential acquirer access to 22% of Poland’s TV audience
share and 33% of the TV ad market, would entail a significant acquisition
premium. TV-exposed stocks in our peer group are trading at
2014E/2015E/2016E EV/EBITDA of 11.3x/9.8x/8.9x. Based on TVN’s expected
EBITDA levels and the book value of NC+/Onet.pl associates, we think a
hypothetical transaction value could reach ca. PLN 20/sh, assuming a 15-20%
transaction premium.
BUY
14% upside
Fair Value
PLN 17.90
Bloomberg ticker
Share Price
Free Float
TVN PW
PLN 15.70
PLN 5,298.27m
46%
PLN m Y/E 31-Dec
2012A
2013A
2014E
2015E
Revenues
EBITDA
1584.0
455.8
1586.3
404.1
1617.2
558.5
1744.7
627.1
555.4
EBIT
374.0
328.9
485.1
adj. net income
227.9
(144.7)
237.7
322.7
1820.2
2123.6
1891.9
1786.5
EPS (PLN)
1.4
(0.5)
0.7
1.0
DPS (PLN)
0.1
0.6
0.0
0.0
Net debt
Y/E 31-Dec
2012A
2013A
2014E
2015E
adj P/E (x)
15.1
(37.3)
21.9
15.5
EV / adj. EBITDA
9.3
14.0
13.5
11.5
net debt / adj. EBITDA
3.2
4.0
3.6
3.0
Capex / Revenues
ROE
23.1%
5.3%
4.4%
4.4%
34.8%
(19.1%)
18.5%
21.2%
Share Price Performance
120
115
110
105
100
95
90
85
Jan Feb Mar Apr May Jun
Jul
Aug Sep Oct Nov Dec
2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014
TVN PW
vs WIG Index
TVN 2014-16 financial goals: TVN expects GDP to grow by 3-3.5% pa in 201416, while the TV ad market should grow by mid-single digits and TVN’s
revenues should grow by low-single digits in 2014E, accelerating to 5-9%
growth in 2015E/16E. TVN expects adj EBITDA (incl. dividends from
associates) of PLN 520m in 2014, PLN 590m in 2015 and PLN 630m in 2016, in
line with our expectations for 14-15. TVN expects capex at ca. PLN 60m in
2014, PLN 70m in 2015 and PLN 60m in 2016 and plans a PLN 225-250m share
buyback in 2015.
Promising outlook for the TV ad market: Despite ongoing audience pressure
from TV market fragmentation (development of thematic channels also on
DTT) and potential pressure from the growing popularity of OTT services, we
believe TV has good prospects in Poland. This is reflected in steadily
increasing daily TV consumption and high payTV penetration. We expect the
TV ad market to maintain its ca. 50% share, growing by 6.2% in 2014E and
6.5% in 2015E.
Sound cash distribution: The planned buyback of PLN 225-250m in 15E implies
a yield of 3.8-4.8% while a payout ratio of 50% implies a DY of 3.2-3.8%.
Analysts
Konrad Ksiezopolski
+48 22 347 4074
kksiezopolski@espiritosantoib.pl
Banco Espírito Santo de Investimento, S.A. – Warsaw Branch
Poland 59 Zlota Street, 00-120 Warsaw
(v1.0.8.0)
Summary Financial Information
2 0 10
2 0 11
2 0 12
2 0 13
2 0 14E
2 0 15 E
2 0 16E
Ratin g
BUY
adj P/E
Valu ation M e trics ( Y e ar e n d D e c)
(213.3)
20.8
15.1
(37.3)
21.9
15.5
14.5
Fair Valu e ( PL N ) :
17 . 9
P/E (x)
121.1
(11.0)
7.2
(29.5)
24.0
15.5
14.5
EV / Sales (x)
3.2
3.1
3.3
4.7
4.4
3.9
3.7
13.1
11.4
11.5
18.6
12.7
10.8
10.1
TVN
Share Price (09/12/2014, PLN):
15.7
EV / EBITDA (x)
Upside / Downside potential
14%
EV / adj EBITDA (x)
FCF Yield (%)
Previous Fair Value (PLN):
14.5
Dividend yield (%)
% change to fair value
23%
EV (PLN m)
Bloomberg
13.1
11.0
9.3
14.0
13.5
11.5
10.5
3.8%
5.8%
-1.2%
9.5%
8.7%
9.6%
10.2%
1.8%
0.4%
1.0%
4.1%
0.0%
0.0%
3.2%
8,093
6,173
5,259
7,522
7,095
6,793
6,564
TVN PW
Reuters
TVNN.WA
Shares in Issue (m)
337
M arke t Cap ( PL N m)
5 , 2 98
Net Debt, end 2013 (PLN m)
2,124
Ke y Ratios
2 0 10
2 0 11
2 0 12
2 0 13
2 0 14E
2 0 15 E
2 0 16E
EBITDA margin
24.3%
27.7%
28.8%
25.5%
34.5%
35.9%
36.3%
11.2%
11.8%
23.1%
5.3%
4.4%
4.4%
4.4%
Capex / Depreciation (x)
1.2
0.8
3.8
1.1
1.0
1.1
1.0
Net Debt / adj. EBITDA (x)
3.7
4.8
3.2
4.0
3.6
3.0
2.5
Capex / Revenue (x)
Adjustments for Associates & Minorities (PLN m)
(1,753)
EBITDA / net interest (%)
En te rprise Valu e ( PL N m)
5 , 669
ROE
ROA
Forth comin g Cataly sts
P& L Su mmary ( PL N m)
Announcement of potential TVN buyer
1-2Q15
4Q14 results
Mar-15
ES Equ ity Re se arch A n aly st
Re ve n u e
% change
EBITD A
Konrad Księżopolski
% margin
+48 22 347 40 74
adj EBITD A
% margin
Depreciation & Amortisation
EBIT
Re ve n u e s Bre akdown ( 2 0 13 )
-4
-1
-3
-4
-4
34.8%
-19.1%
18.5%
21.2%
20.2%
0.9%
-6.2%
9.6%
-4.7%
5.8%
8.5%
8.6%
2 0 10
2 0 11
2 0 12
2 0 13
2 0 14E
2 0 15 E
2 0 16E
2,539
1, 960
1, 5 84
1, 5 86
1, 617
1, 7 45
1, 7 98
20.0%
-22.8%
-19.2%
0.1%
1.9%
7.9%
3.0%
616
5 43
45 6
40 4
559
62 7
65 2
24.3%
27.7%
28.8%
25.5%
34.5%
35.9%
36.3%
617
559
5 65
537
526
5 91
62 6
24.3%
28.5%
35.7%
33.9%
32.5%
33.9%
34.8%
(247)
(113)
(82)
(75)
(73)
(72)
(77)
3 69
43 0
374
329
485
555
575
-40%
17%
-13%
-12%
48%
14%
3%
% margin
14.5%
22.0%
23.6%
20.7%
30.0%
31.8%
32.0%
Net Financials
Other Pre-tax Income
0
(0)
0
0
0
0
0
(246)
(325)
(114)
(575)
(217)
(157)
(149)
0
0
0
0
0
0
1
Pre -Tax Profit
12 3
( 84)
2 60
( 2 46)
2 68
3 98
42 6
Income Tax Expense
(72)
19
252
63
(51)
(76)
(81)
Discontinued activity
0
(251)
(50)
0
0
0
0
Minority Interests
0
0
0
0
0
0
1
48
( 3 17 )
47 9
( 183 )
2 17
323
3 45
(27)
169
228
(145)
238
323
345
0.1
(0.9)
1.4
(0.5)
0.7
1.0
1.1
0.3
0.0
0.1
0.6
0.0
0.0
0.5
N e t In come
adj Net income
TV
adverstising
98%
-2
-34.3%
% change
Associates
others
2%
-3
3.9%
EPS (PLN)
D PS ( PL N )
29%
-11%
46%
0%
0%
0%
0%
Shares in Issue (Less Treasury) (m)
Payout Ratio
341.3
343.3
343.9
343.9
331.4
318.9
318.9
Cash Flow Su mmary ( PL N m)
2 0 10
2 0 11
2 0 12
2 0 13
2 0 14E
2 0 15 E
2 0 16E
46
(317)
470
(207)
217
323
345
TVN - profitability ratios, 2 0 0 9-2 0 15 E
40%
30%
Net income
20%
D&A
247
284
96
75
73
72
77
10%
Change in Working Capital
(27)
(146)
(95)
95
(4)
(17)
(7)
Other Operating Cash Flow
0%
2010
2011
2012
2013
2014E
2015E
2016E
-10%
Ope ratin g Cash Flow
Capital Expenditure
-20%
Fre e Cash Flow
adj EBITDA margin
adj net margin
Sh are h olde rs stru ctu re , N ove mbe r 2 0 14
Acquisitions & Disposals
Dividend Paid to Shareholders
Equity Raised / Bought Back
Other Financing Cash Flow
N e t Cash Flow
others,
25.6%
NVision/PTH,
51.8%
Aviva OFE,
7.2%
Balan ce Sh e e t Su mmary ( PL N m)
633
236
179
173
325
5 96
523
557
5 88
(284)
(231)
(366)
(84)
(72)
(77)
(80)
220
204
( 40 )
5 12
45 1
47 9
508
53
280
896
106
0
0
0
(106)
(14)
(34)
(220)
0
0
(161)
20
16
0
28
0
0
0
(88)
(322)
(1,066)
(324)
(630)
(374)
(118)
99
164
( 2 45 )
10 1
( 17 9)
10 5
229
2 0 10
2 0 11
2 0 12
2 0 13
2 0 14E
2 0 15 E
2 0 16E
802
667
1,274
398
270
375
604
763
340
415
393
395
391
385
Goodwill & Intangibles
2,568
1,722
234
242
242
242
242
2
1
1,866
1,730
1,704
1,666
1,629
Total A sse ts
Interest Bearing Debt
Other Liabilities
ITI Holdings,
1.6%
(145)
Tangible Fixed Assets
Other Assets
PZU OFE,
6.2%
615
43 5
Cash & Equivalents
Associates & Financial Investments
ING OFE,
7.7%
239
504
Total L iabilitie s
Shareholders' Equity
Minority Interests
Total Equ ity
Net Debt
215
228
432
475
484
479
471
5 , 191
5 , 112
4, 966
3 , 899
3,736
3 , 817
3 , 994
3,113
3,338
3,094
2,522
2,162
2,162
2,162
839
597
513
420
400
133
126
3 , 95 3
3 , 93 5
3 , 60 7
2 , 942
2 , 5 62
2 , 2 94
2 , 2 88
1,239
924
1,375
957
1,174
1,523
1,706
0
(1)
(16)
(26)
(26)
(26)
(26)
1, 2 3 9
92 4
1, 3 7 5
95 7
1, 17 4
1, 5 2 3
1, 7 0 6
2,311
2,671
1,820
2,124
1,892
1,786
1,558
Source: Company data, Reuters, Bloomberg, BESI Research for estimates.
Page 12 of 30
TVN’s Mid-Term Financial Outlook
On November 19th 2014, TVN presented its mid-term outlook with the
following macro, operating and financial forecasts:

GDP growth in Poland will amount to approx 3.0–3.5% pa in 20142016;

TV advertising market growth should remain relatively stable in the
low to mid-single digits in 2014-2016, while the online advertising
market is expected to post growth rates in the high-single digits over
2014-2016;

TVN Group’s full-year consolidated revenues are likely to grow by
low-single digits in 2014 and accelerate to mid- to high-single digits
of between 5% and 9% in both 2015 and 2016;

Based on the assumptions outlined above, together with continued
positive developments in associate distribution expectations, TVN
forecasts consolidated adjusted EBITDA of approx. PLN 520m in
2014, PLN 590m in 2015 and PLN 630m in 2016.
In addition, TVN assumes the following in terms of investing and financing
activities:

Proportionate share buyback of PLN 225-250m in 2015, with dividend
paid in 2016 with a 50% payout ratio of consolidated net profit in
2015;

Capex of approx. PLN 60m in 2014, PLN 70m in 2015 and PLN 60m in
2016, with continued low cash taxes payable;

Operating cash flow in excess of capex, taxes, interest payments and
shareholder distributions in both 2015 and 2016 will be applied
primarily against debt reduction;

No material capital market transactions are expected to occur
through the end of 2016;

No material new financings are expected, although should an
opportunity arise to refinance existing bond debt as a result of
favourable market conditions, and/or positive circumstances arising
from a potential TVN change of control, then a refinancing could
occur;

EUR/PLN exchange rate development in line with the current financial
market consensus.
Looking beyond 2016 and assuming that Poland’s GDP continues to grow at a
rate of between 3% and 4%, TVN expects to achieve a 2017-2019 revenue
CAGR of approx. 5%. TVN emphasized that any assessment of GDP and
revenues assumes no major macroeconomic disruption (e.g. sovereign debt
crisis in Europe, geopolitical instability in neighbouring countries, global
economic uncertainty).
Adj EBITDA is calculated as core TV EBITDA plus dividend payments from
associates. Adj EBITDA does not include proportionate net income from
associates. When looking at our estimates, TVN’s adj EBITDA forecasts are
either in line with or slightly above our forecasts.
Figure 1
2014-2016 Forecasts – TVN vs BESI vs Bloomberg consensus
2014E
(PLN m)
adj. EBITDA
2015E
2016E
BESI
BBG
TVN
BESI
BBG
TVN
BESI
BBG
TVN
526
555
520
591
611
590
626
646
630
Source: BESI Research, Company Data, Bloomberg for consensus
Page 13 of 30
ITI Group and Canal+ consider selling stake in TVN
On October 18th, TVN announced that ITI Group and Groupe Canal+ would
jointly review their strategic options for their combined majority stake in TVN.
The announcement followed expressions of interest from strategic and
financial investors in acquiring a controlling stake in the company. We note
that so far there has been no decision on the potential disposal of TVN and
there is no guarantee that such a decision will be made in the future.
Together, ITI and Canal+ control a 51.75% stake in TVN though N-Vision/Polish
Television Holding. ITI holds an additional 1.55% stake in TVN through ITI
Holdings. Canal+ entered on 30th November 2012, buying a 40% stake in NVision for EUR 233m. As part of the deal, TVN transferred its N platform to the
newly created NC+ platform formed of N-platform and Canal+ satellite payTV
entities with a 32% stake in NC+, of which 51% belongs to Canal+ and 17% to
UPC. At the beginning of 2014, Canal+ acquired an additional 9% stake in NVision. The implied value of the stake in TVN acquired by Canal+ is PLN 21.1m,
which is 35% above the current market price. Following the 3Q14 results
release, the CEO communicated that 14 entities (both strategic and financial
investors) have expressed interest in TVN.
Figure 2
TVN – shareholder structure
In the last Polish Press Agency (PAP) interview from 2nd Dec 2014, the CEO
stated that there are ca. 12 entities interested in the process. Time Warner and
Discovery were both mentioned in the article as potential buyers of TVN. The
CEO also stated that the buyer could be picked in 1Q15.
Below we present a table with a list of M&A transactions in the media and
payTV business around the world announced in the last twelve months, along
with the value of the deal and implied multiples.
Time Warner and Discovery Communication have been mentioned in the press
as likely candidates for the stake in TVN. The former because of its presence in
CEE region through CETV and the latter because of its recent appetite for
expansion though M&A.
We think potential post-acquisition synergies would be primarily in the area of
TV content (both internally produced and acquired). In our view, a strategic
partner with a global presence and client base would increase TVN’s
negotiating power with studios, enabling it to buy externally produced
content at lower cost. In TVN’s opex base, external TV content costs amount
to ca. PLN 150m a year. In our view, working with a strategic partner might
help the company to reduce this by ca. 5-10%, or PLN 7.5-15m per year (ca. 1.53% of 2014E core TV EBITDA). In addition, both Time Warner and Discovery
are very big own content producers though various TV channels (HBO for
Time Warner and Discovery Channels for Discovery). Optimization of own
Page 14 of 30
content production using a strategic partner’s know-how could also slightly
reduce the cost of own content, on which TVN currently spends PLN 500m
pa. On top of this, if a global media company with an investment grade rating
were to take over, TVN might obtain investment grade as well. This could
materially reduce financing costs which are currently at 7.375-7.875% for EUR
denominated Senior Notes. In our view, an investment grade rating could
potentially reduce the company’s financing costs by ca. 200-300bp. Current
EUR Senior Notes balance is at PLN 2.3bn so this could reduce yearly financial
costs by ca. PLN 50-70m, assuming a similar debt level.
Figure 3
Recent M&A in Media and Communications industry
Target Industry
Cable/Satellite TV
Cable/Satellite TV
Cable/Satellite TV
Advertising Agencies
Cable/Satellite TV
Cable/Satellite TV
Broadcast Serv/Program
Television
Cable/Satellite TV
Cable/Satellite TV
Television
Television
Television
Advertising Services
Television
Television
Cable/Satellite TV
Television
Cable/Satellite TV
Television
Television
Television
Television
Cable/Satellite TV
Cable/Satellite TV
Announce
Date
13-Feb-14
18-May-14
13-Jan-14
28-Jul-13
17-Mar-14
7-Apr-14
24-Sep-14
21-Mar-14
20-Dec-13
25-Jul-14
6-Nov-14
13-Jun-13
3-Jan-14
7-May-14
1-Oct-14
17-Jul-14
8-May-14
12-Aug-13
18-Nov-13
24-Jul-14
17-Oct-14
1-Aug-14
14-Aug-14
11-Feb-14
29-May-14
26-Jun-14
22-Jul-14
13-Oct-14
29-May-14
27-Feb-14
13-Dec-13
10-Sep-14
6-Feb-14
27-May-14
1-Sep-14
11-Jul-14
29-Oct-14
12-Dec-13
13-Dec-13
Announced
total value
Target Nam e
Acquirer Nam e
(m )
TV/EBITDA
Time Warner Cable Inc
Comcast Corp
68 405
8.6
DIRECTV
AT&T Inc
66 044
8.3
Time Warner Cable Inc
Charter Communications Inc
61 256
7.7
Omnicom Group Inc
Publicis Groupe SA
19 420
9.2
Grupo Corporativo ONO SA
Vodafone Group PLC
10 026
10.5
Numericable-SFR
Altice SA
5 483
11.3
Starz
Potential Buyer
5 000
11.3
LIN Media LLC
Media General Inc
2 450
14.6
Kabel Deutschland Holding AG
Vodafone Group PLC
2 398
9.7
Sky Deutschland AG
Sky PLC
2 385
204.9
Telediffusion de France SAS
Brookfield Infrastructure Partners LP
2 207
11.1
Belo Corp
Gannett Co Inc
2 028
7.8
Northern & Shell Television Group Ltd Potential Buyer
1 150
DTS Distribuidora de Television Digital SA
Telefonica SA
1 044
Advanstar Communications Inc
UBM PLC
972
16.6
ITV PLC
Liberty Global PLC
822
11.6
ALL3MEDIA International Ltd
Discovery Communications Inc,Liberty Global PLC
736
Digital Generation Inc
Extreme Reach Inc
485
5.2
Numericable-SFR
Altice SAS
428
5.4
Mediaset Espana Comunicacion SA
Mediaset Espana Comunicacion SA
414
11.4
Havas SA
Bollore SA
351
1.0
NET Servicos de Comunicacao SA
America Movil SAB de CV
338
4.9
Innocean Worldw ide Inc
Standard Chartered PLC,Morgan Stanley Private Equity (Fund:294
Morgan Stanley
18.4
Eyew orks Holding BV
Warner Bros Television Group
273
TV18 Broadcast Ltd
Reliance Industries Ltd
229
44.8
CSC Media Group Ltd
Sony Corp
182
Promotora de Informaciones SA
Private Investor
135
2.8
Matomy Media Group Ltd
Publicis Groupe SA
81
26.8
TV18 Broadcast Ltd
Reliance Industries Ltd
35
24.4
UTV Media PLC
Unnamed Buyer
30
9.0
Advanced Inflight Alliance AG
Global Eagle Entertainment Inc
25
13.4
Hathw ay Cable & Datacom Ltd
CITIC Securities Co Ltd
25
2.0
Wow ow Inc
Tokyo Broadcasting System Holdings Inc
22
4.4
mktg inc
Dentsu Inc
21
6.0
SEEC Media Group Ltd
Private Investor
12
15.9
Fortune Indonesia Tbk PT
Rajaw ali Corp PT
9
11.5
Fortune Indonesia Tbk PT
Rajaw ali Corp PT
5
29.6
Fujian Sanao Technology Co Ltd
China Construction Bank International Asset Manage
3
Interactive Prospect Targeting Ltd
Management Group
1
Deal
Currency
Status
TV/EBIT TV/Rev of Deal
Pending
14.6
3.1
USD
Pending
12.9
2.1
USD
Withdraw n
13.0
2.8
USD
Terminated
10.6
1.4
USD
Completed
25.2
4.5
EUR
Completed
25.4
4.9
EUR
Proposed
11.8
3.0
USD
Pending
24.9
3.8
USD
Pending
19.6
4.0
EUR
Completed
3.6
EUR
Pending
15.4
5.0
EUR
Completed
8.8
2.8
USD
Proposed
26.7
2.0
GBP
Pending
18.6
1.4
EUR
Pending
32.0
3.0
USD
Completed
13.5
3.1
GBP
Completed
59.1
8.8
EUR
Completed
14.5
1.3
USD
Completed
10.6
2.4
EUR
Completed
35.1
4.2
EUR
Pending
1.3
0.2
EUR
Pending
15.6
1.5
BRL
Private
Completed
Equity Asia18.9
IV LP),Isola
2.8Capital Group
KRW
Completed
8.6
0.8
AUD
Completed
70.3
3.1
INR
Pending
12.3
4.3
GBP
Pending
14.1
0.2
EUR
Pending
32.7
1.6
GBP
Completed
33.1
2.6
INR
Completed
9.7
1.9
EUR
Pending
20.2
1.4
EUR
Pending
41.4
0.4
INR
Completed
6.3
0.7
JPY
Completed
7.6
0.2
USD
Completed
28.6
1.2
HKD
Completed
13.7
0.3
IDR
Pending
35.5
0.7
IDR
Completed
9.0
1.9
CNY
Completed
22.6
0.2
GBP
Source: Bloomberg.
Discovery among the most active in M&A recently
Discovery stepping into Eurosport
On December 21, 2012 TF1 group sold a 20% equity interest in the Eurosport
group and in the TV Breizh, Ushuaïa TV, Stylía and Histoire pay-TV theme
channels to the Discovery Communications group. The 20% stake in Eurosport
was valued at EUR 170m, implying a EUR 850m enterprise value for 100% of
Eurosport. The sale of the 20% interest in the theme channels was completed
on the basis of an enterprise value of EUR 70m.
In 2012, Eurosport channels generated EUR 475m of revenues (EUR 452m in
2013) and EUR 63.6m of operating income (EUR 81.8m in 2013). TF1 group
D&A is ca. 2.5% of total revenues. Using the same ratio for the Eurosport unit,
hypothetical EBITDA could amount to EUR 75.5m in 2012 and EUR 93m in
2013. The deal happened in December 2012, hence its valuation needs to be
based on forecasted numbers for 2012. The transaction multiple (EV/EBITDA
2012) reached 11.25x for the non-controlling 20% stake.
The Discovery Communications group has the option to acquire, during a
period of one year from December 21, 2014, a further 31% interest in Eurosport
SAS (the parent company of the Eurosport group), which would raise its
Page 15 of 30
equity interest in the company to 51%. If the Discovery Communications group
exercises this option, TF1 could then sell the rest of its interest in Eurosport
SAS (i.e. 49%) to the Discovery Communications group during a period of one
year from the date on which the Discovery Communications group acquires
the additional 31% interest.
The Discovery Communications group also has the option to acquire, during a
period of one year from December 21, 2014, a further 29% interest in the payTV theme channels, which would raise its equity interest in the channels to
49%. If the Discovery Communications group acquires an additional 31%
interest in Eurosport SAS (see above) but does not acquire the additional 29%
interest in the pay-TV theme channels, TF1 could then sell a further 15% equity
interest in those channels to the Discovery Communications group, raising the
latter’s equity interest in those channels to 35%.
Exercising those two options, based on 2012 deal pricing would cost
Discovery ca. EUR 263m for 31% stake in Eurosport and ca. EUR 20m for 29%
stake in theme channels giving in total ca. EUR 283m cash outlay in 2015.
In 2013, Discovery Communication has generated: (1) USD 5.5bn of revenues,
+23% YoY, (2) USD 2.4bn of adj OIBDA, +16% YoY, (3) USD 1.1bn of net
income, +14% YoY, (4) USD 1.2bn Free Cash Flow, +14% YoY. In 2014E
Discovery targets OIBDA of USD 2.5-2.55bn.
Discovery together with Liberty Global buys All3Media
On 8th May 2014 Discovery Communications and Liberty Global announced an
agreement to form a 50:50 joint venture to acquire All3Media, which is the
largest independent production group in the U.K. and has a strong presence in
the US, Germany, the Netherlands and New Zealand and 26 creative centers in
the world’s largest TV-producing markets. For the fiscal year ending in August
2013, All3Media recorded revenues of approximately GBP 505m. Discovery
Communications and Liberty Global’s joint venture acquired All3Media at an
enterprise value of GBP 550m which represents EV/EBITDA multiple of
approx. 8.5x.
Discovery acquired The Living Channel New Zealand
In July 2014, Discovery acquired The Living Channel New Zealand, which
operates pay TV channels The Living Channel and Food TV. Discovery
currently distributes two channels through the Sky TV platform – Discovery
Channel and Animal Planet.
Terms of deals with Associates NC+ and Onet.pl
NC+
TVN holds a 32% stake in NC+, while Groupe Canal+ holds 51% and UPC 17%.
Canal+ Group has a call option to acquire TVN’s 32% of NC+ at market value,
which is exercisable during the three months following November 30th, 2015
and November 30th, 2016. Additionally, following the call option periods, both
TVN and Canal+ Group have the right to sell their interest in NC+ (with Canal+
Group having the right to require TVN to sell its shares in NC+ at the same
terms). If the option is not exercised, TVN has the right to require NC+ to
undertake an initial public offering.
The book value of NC+ in 3Q14 reached PLN 1.5bn, while on the day of the
deal TVN estimated the value of a 32% stake in NC+ at PLN 1.9bn. NC+’s
payout ratio is set at 75%.
On the day of the deal, NC+ had 2.5m subscribers with pro-forma revenues of
PLN 2.2m and pro-forma EBITDA of PLN 200m. TVN commented that benefits
of scale, synergies and attractive payTV content will enable it to lift its total
customer base to 3m with EBITDA at PLN 550m at end-2015. However, the
merger was followed by an unsuccessful price offer that was widely criticized
by customers and resulted in visible client outflows. In 3Q14, the NC+ client
base reached 2.2m while 9M14 EBITDA increased to PLN 280m (+45% yoy)
Page 16 of 30
and revenues fell to PLN 1.6m (-5% yoy). During the 3Q14 results conference
call, the CEO commented that TVN still targets PLN 550m full-year EBITDA,
but its delivery will be delayed by one year (i.e. to 2016). Erosion of the client
base has already stabilized, with ARPU in 3Q14 reaching PLN 68, up 4% yoy.
Onet.pl
TVN holds a 25% interest in Onet Holding Group while 75% is controlled by
Ringer Axel Springer Media.
The shareholders’ agreement contains a swap option for TVN to exchange a
number of TVN’s (its subsidiaries’) shares in Onet Holding for the shares in
RAS (option valid if RAS conducts an initial public offering). Furthermore,
under the shareholders’ agreement, the following options are granted: (1) the
first put option for TVN (or its subsidiary) to sell all its shares in Onet Holding
to RAS at any time during: (i) the 90-day period commencing on January 1,
2016; or (ii) the 20 business day period commencing after Onet Holding’s
shareholders meeting has approved its financial statements for the most
recently concluded financial year, whichever period ends later; and (2) the call
option for RAS to acquire the shares in Onet Holding’s share capital from TVN
(or its subsidiary) at any time during (i) the 90-day period commencing on
January 1, 2017 or (ii) the 20 business day period commencing after Onet
Holding’s shareholders meeting has approved its financial statements for the
most recently concluded financial year, whichever period ends later; and, (3)
the second put option for TVN (or its subsidiary) to sell all its shares in Onet
Holding to RAS at any time within 60 days following the expiration of the call
option period.
The shareholders’ agreement also contains the standard “joint-exit” clauses
allowing TVN and RAS to sell jointly all their shares in Grupa Onet.pl held
directly or indirectly (drag-along and tag-along rights).
Financial forecasts
Changes to estimates
Figure 4
TVN – changes to our estimates
(PLN m )
New
2014E
Revenues
Old
2015E
Change
New
Old
2016E
Change
New
Old
Change
1,617
1,638
-1%
1,745
1,718
2%
1,798
1,756
2%
EBIT
485
523
-7%
555
587
-5%
575
588
-2%
EBITDA
559
607
-8%
627
674
-7%
652
679
-4%
Net profit
217
436
-50%
323
343
-6%
345
346
0%
BBG Change
BESI
BBG Change
BESI
Source: BESI Research for estimates
BESI vs Bloomberg consensus
Figure 5
BESI vs BBG
2014E
2015E
2016E
(PLN m )
BESI
Revenues
1,617
1,619
0%
1,745
1,693
3%
1,798
1,769
BBG Change
2%
EBITDA
559
555
1%
627
611
3%
652
646
1%
EBIT
485
487
0%
555
542
3%
575
576
0%
Net income
238
286
-17%
323
329
-2%
345
377
-9%
Source: BESI Research for estimates, Bloomberg for consensus
Valuation
DCF
We use a DCF with a 10Y forecast period; however as we are at the end of
2014, we use net debt 2014E and FCF in 2015E-2023E. We use a RFR of 2.8%
(vs 3.8% before) and beta at 1.0x (vs 1.1x before) and g of 0% (unchanged).
Page 17 of 30
Figure 6
DCF
DCF Valuation
(PLN m)
2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E
2022E
2023E
RV
445
497
517
524
521
520
519
518
517
516
516
Tax rate
19%
19%
19%
19%
19%
19%
19%
19%
19%
19%
19%
NOPAT
360
403
419
424
422
421
421
420
419
418
418
73
72
77
80
82
82
82
83
83
83
-72
-77
-80
-82
-82
-82
-83
-83
-83
-84
-4
-17
-7
-5
-1
-1
-1
-1
-1
-1
358
380
409
417
421
420
419
418
417
416
418
-23.1%
6.3%
7.6%
2.0%
0.8%
-0.2%
-0.2%
-0.2%
-0.2%
-0.2%
0.0%
57.9% 56.6% 54.1% 51.9% 50.1% 42.4% 40.8% 39.2%
EBIT
D&A
Capex
Change of WC
FCF
FCF change
WACC Calculation
debt/equity
37.8%
36.6%
36.6%
risk free rate
2.8%
2.8%
2.8%
2.8%
2.8%
2.8%
2.8%
2.8%
2.8%
2.8%
2.8%
credit premium
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
market premium
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
cost of debt
4.7%
4.7%
4.7%
4.7%
4.7%
4.7%
4.7%
4.7%
4.7%
4.7%
4.7%
cost of equity
7.8%
7.8%
7.8%
7.8%
7.8%
7.8%
7.8%
7.8%
7.8%
7.8%
7.8%
WACC
6.0%
6.0%
6.1%
6.2%
6.2%
6.5%
6.5%
6.6%
6.6%
6.7%
beta
6.7%
PV (FCF)
2,734
PV (RV)
3,493
net debt, end 2014E
1,892
Value of core business (PLN m)
4,335
Value of n/C+ & Onet.pl
1,753
Equity value (PLN m)
6,088
# of shares (m)
337
Fair v alue/ share (PLN)
18.0
Shares adjusted to 12.5m buyback in 2014 and share issue related with management program
Source: BESI Research for estimates, Company Data
Figure 7
TVN – sensitivity analysis
WACC level
RV FCF y oy change
18.0
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
0.0
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
8.2%
15.1
15.6
16.1
16.7
17.4
18.2
8.2%
-16%
-13%
-11%
-7%
-3%
1%
7.7%
15.6
16.1
16.7
17.4
18.1
19.0
7.7%
-14%
-11%
-7%
-4%
1%
6%
7.2%
16.1
16.6
17.3
18.1
19.0
20.1
7.2%
-11%
-8%
-4%
0%
5%
11%
6.7%
16.6
17.3
18.0
18.9
20.0
21.2
6.7%
-8%
-4%
0%
5%
11%
18%
6.2%
17.2
18.0
18.9
19.9
21.2
22.7
6.2%
-5%
0%
5%
10%
17%
26%
5.7%
17.9
18.8
19.9
21.1
22.6
24.5
5.7%
-1%
4%
10%
17%
25%
36%
5.2%
18.8
19.8
21.0
22.6
24.4
26.8
5.2%
4%
10%
17%
25%
35%
49%
Page 18 of 30
Peer valuation
Figure 8
Peer valuation – priced as on 9/12/2014
N ame
T ic k e r
P ric e
( LC )
E V / E B IT D A
2 0 14 E
2 0 15 E
P /E
2 0 16 E
E B IT D A m a rgin
2 0 14 E
2 0 15 E
2 0 16 E
2 0 14 E
2 0 15 E
2 0 16 E
TV
TVN (B ESI)
TVN P W
15.7
12.7
10.8
10.1
22.3
16.4
15.4
35.7%
25.5%
34.5%
Cyfro wy P o lsat (B ESI)
CP S P W
24.7
9.8
7.4
7.1
40.8
17.0
16.1
37.3%
37.9%
39.5%
CETV
CETV US
2.8
14.2
9.8
8.1
-3.2
-9.5
-260.2
12.6%
17.3%
19.8%
RTL
RTL B B
78.2
10.6
10.3
9.8
18.7
17.1
16.4
22.3%
22.4%
22.9%
P ro sieben Sat1
P SM GR
33.7
11.3
10.6
10.2
17.9
15.7
14.7
29.4%
29.3%
29.2%
ITV LN
208.5
11.5
10.5
9.8
15.8
14.3
13.3
28.9%
29.9%
30.6%
A 3TV SM
11.0
19.1
13.1
10.2
27.8
18.1
14.0
15.1%
20.4%
24.4%
CB S Co rp
CB S US
52.4
10.3
9.8
8.9
15.4
15.1
13.5
23.7%
24.3%
25.5%
CTC M edia
CTCM US
4.9
2.8
3.1
3.0
5.7
6.3
6.0
29.7%
28.6%
28.8%
M 6 M etro po le
MMT
15.6
6.5
6.2
6.1
16.8
15.8
15.1
22.0%
22.3%
22.4%
M o dern Times
M TGB
244.0
11.4
9.7
9.0
13.6
12.1
11.2
10.1%
11.2%
11.6%
TF1
TFI FP
12.3
11.2
8.8
8.0
27.8
18.4
16.1
9.4%
12.0%
12.8%
11.3
9 .8
8 .9
16 .3
15 .4
14 .1
2 2 .3 %
2 3 .6 %
2 5 .5 %
39.5%
ITV
A ntena3
T V M e dia n
S a t e llit e T V
Cyfro wy P o lsat (B ESI)
CP S P W
921
9.8
7.4
7.1
40.8
17.0
16.1
37.3%
37.9%
B SkyB
B SY LN
83.785
8.8
7.8
7.6
15.9
14.2
14.8
19.9%
20.8%
19.6%
DirecTV
DTV US
71.39
7.1
6.8
6.6
15.0
13.5
12.6
25.0%
25.1%
24.5%
Dish Netwo rk
DISH US
6.75
13.1
12.6
12.1
45.1
41.0
37.3
19.1%
19.0%
18.9%
SKY DEUTSCHLA ND A G
SKYD GY
20.72
71.0
28.8
17.9
-77.7
157.0
42.2
5.1%
11.3%
16.3%
CA B LEVISION SYSTEM S-NY CVC
GRP -A
US
56.14
7.6
7.5
7.3
19.0
23.4
19.2
28.5%
28.8%
29.1%
COM CA ST CORP -CLA SS ACM CSA US
64.2
8.3
7.9
7.4
17.6
17.1
14.9
33.2%
33.3%
32.9%
DISH TV INDIA LTD
DITV IN
D T H m e dia n
11.3
9.3
8.0
6791.5
45.7
23.7
25.2%
26.6%
26.9%
7 .9
7 .6
7 .4
2 8 .4
15 .6
15 .4
2 2 .5 %
2 2 .9 %
2 2 .1%
O nline
Yaho o !
YHOO US
50.5
28.3
27.9
26.5
30.0
44.9
39.5
29.5%
29.4%
30.7%
Go o gle
GOOG US
533.0
11.6
9.8
8.3
20.3
17.2
14.6
49.5%
49.4%
49.6%
Yandax
YNDX US
20.1
16.4
13.4
10.9
24.9
20.6
16.6
42.1%
42.1%
42.4%
A mazo n
A M ZN US
312.5
22.8
17.1
13.1
169.7
82.3
45.3
6.9%
7.8%
8.6%
B IDU US
229.9
28.8
20.6
14.9
35.2
25.4
18.6
33.5%
33.0%
34.4%
50.8%
B aidu
M ail.ru
M A IL LI
17.3
10.0
8.7
7.2
0.3
0.3
0.2
51.8%
50.2%
eB ay
EB A Y US
55.4
11.5
10.4
9.3
18.5
16.9
15.2
32.1%
31.5%
31.2%
A OL
A OL US
45.3
7.0
6.5
6.0
22.4
18.7
16.5
19.8%
19.7%
20.0%
IA C/INTERA CTIVE
IA CI US
64.6
10.3
9.3
7.3
24.1
17.6
13.5
17.3%
18.0%
21.4%
035720 KS
134300
38.0
21.6
17.9
97.2
27.5
26.2
22.2%
28.8%
32.2%
Yaho o ! Japan
4689 JP
426.0
9.0
8.4
7.8
18.5
17.5
16.3
51.5%
51.4%
51.7%
Netease
NTES US
99.9
11.9
9.9
8.4
16.3
13.9
12.0
44.3%
43.6%
43.4%
11.8
10 .2
8 .9
2 3 .2
18 .1
16 .4
3 2 .8 %
3 2 .3 %
3 3 .3 %
12 .7
10 .8
10 .1
2 2 .3
16 .4
15 .4
3 5 .7 %
2 5 .5 %
3 4 .5 %
10 .3
8 .6
8 .1
- 2 7 9 .0
2 6 .9
2 0 .0
DA UM
O nline M e dia n
T V N ( B E S I)
TVN P W
T V N ( B E S I) - c o re T V
Equity value o f co re TV business (P LN m)
Equity value per share (P LN)
Value o f NC+ (P LN m)
Value o f Onet.pl (P LN m)
Equity value (P LN m)
Equity value per share (P LN)
4,228
12.5
1548
205
5,981
17.7
Source: Company data, BESI Research for estimates
Page 19 of 30
Financials
Income statement
Figure 9
TVN – P&L
TVN - P&L (PLN m )
2009
2010
2011
2012
2013
2014E
2015E
2016E
2017E
Revenues
2,115
2,539
1,960
1,584
1,586
1,617
1,745
1,798
1,837
10%
20%
-23%
-19%
0%
2%
8%
3%
2%
-1,780
-2,127
-1,409
-1,173
-1,128
-1,172
-1,247
-1,281
-1,314
660
% YoY change
OPEX
EBITDA
795
616
543
456
404
559
627
652
-23%
-12%
-16%
-11%
38%
12%
4%
1%
37.6%
24.3%
27.7%
28.8%
25.5%
34.5%
35.9%
36.3%
35.9%
600
617
559
565
537
526
591
626
635
3%
-9%
1%
-5%
-2%
12%
6%
1%
28.4%
612
24.3%
369
28.5%
430
35.7%
374
33.9%
329
32.5%
485
33.9%
555
34.8%
575
34.6%
581
-40%
17%
-13%
-12%
48%
14%
3%
1%
28.9%
14.5%
22.0%
23.6%
20.7%
30.0%
31.8%
32.0%
31.6%
-145
% YoY change
% EBITDA margin
adj EBITDA
% YoY change
% adj EBITDA margin
EBIT
% YoY change
% EBIT margin
Financial income/(expense), net
-192
-246
-325
-114
-575
-217
-157
-149
Share /loss of associate
-39
0
0
0
0
0
0
0
0
Profit before tax
381
123
-84
260
-246
268
398
426
436
Income tax
effective tax rate
Discontinued activity
-34
-72
19
252
63
-51
-76
-81
-83
-9%
-59%
-22%
97%
-26%
-19%
-19%
-19%
-19%
0
0
-251
-50
0
0
0
0
0
421
48
-317
479
-183
217
323
345
353
% YoY change
-257%
-89%
-765%
-251%
-138%
-219%
49%
7%
2%
% net margin
19.9%
1.9%
-16.2%
30.2%
-11.5%
13.4%
18.5%
19.2%
19.2%
Net incom e
Recurrent Net Incom e
% YoY change
256
-27
169
228
-145
238
323
345
353
-237%
-111%
-722%
35%
-164%
-264%
36%
7%
2%
1.2
0.1
-0.9
1.4
-0.5
0.7
1.0
1.1
1.1
-260%
-89%
-761%
-251%
-138%
-223%
54%
7%
2%
EPS (PLN)
% YoY change
Recurrent EPS (PLN)
% YoY change
0.7
-0.1
0.5
0.7
-0.4
0.7
1.0
1.1
1.1
-240%
-111%
-719%
35%
-164%
-270%
41%
7%
2%
Balance sheet
Figure 10 TVN – balance sheet
TVN - Balance sheet (PLN m )
2009
2010
2011
2012
2013
2014E
2015E
2016E
2017E
Total fixed assets
3,721
3,548
2,291
2,946
2,841
2,825
2,779
2,727
2,674
799
763
340
415
393
395
391
385
377
1,678
1,678
953
144
144
144
144
144
144
789
779
694
31
31
31
31
31
31
93
112
75
59
67
67
67
67
67
1
2
1
1,866
1,730
1,704
1,666
1,629
1,594
PP & E, net
Goodw ill
Brand
otehr intangibles
Investments
Other fixed assets
361
215
228
432
475
484
479
471
461
1,016
1,643
1,358
2,020
1,058
912
1,038
1,267
1,488
ST programming
231
247
241
259
245
220
214
203
190
Trade and other receivables
323
335
376
317
342
349
376
387
396
Other current assets
81
259
73
170
73
73
73
73
73
Cash and equivalents
382
802
667
1,274
398
270
375
604
829
Total assets
4,983
5,191
5,112
4,966
3,899
3,736
3,817
3,994
4,161
Total stockholders equity
1,285
1,239
924
1,375
957
1,174
1,523
1,706
1,887
-360
0
-1
-16
-26
-26
-26
-26
-26
Liabilities
3,698
3,953
3,935
3,607
2,942
2,562
2,294
2,288
2,275
Senior Notes (10.75%) due 2017
1,589
2,263
2,542
2,357
2,522
1,720
1,720
1,720
1,720
0
671
752
697
0
442
442
442
442
1,065
179
43
40
0
0
0
0
0
287
240
164
170
133
136
147
151
154
Total current assets
Including minority interest
Senior Notes (7.875%)
Other debt
Trade payables
other
Total equity & liabilities
757
600
433
343
287
264
-14
-25
-41
4,983
5,191
5,112
4,966
3,899
3,736
3,817
3,994
4,161
Page 20 of 30
Cash Flow
Figure 11
TVN – cash flow
TVN - Cash Flow (PLN m )
2009
2010
2011
2012
2013
2014E
2015E
2016E
2017E
Net incom e
346
46
-317
470
-207
217
323
345
353
D&A
183
247
284
96
75
73
72
77
80
Decpreciation of programming
167
194
196
251
138
139
152
158
162
-154
-227
-225
-296
-140
-120
-130
-134
-137
6
-27
-146
-95
95
-4
-17
-7
-5
29
271
644
-101
555
217
157
149
145
Payment for programming rights
Change in Net Working Capital
Other
Cash Flow from Operations
Capital Expenditures
578
504
435
325
596
523
557
588
598
-329
-284
-231
-366
-84
-72
-77
-80
-82
Other
-233
53
280
896
106
0
0
0
0
Cash Flow from Investing Activities
-562
-231
48
530
22
-72
-77
-80
-82
Change in Debt
587
23
-470
-325
-2,807
-380
-124
-118
-119
Issue of shares
1
20
16
0
28
0
0
0
0
-194
-106
-14
-34
-220
0
0
-161
-172
Other
-72
-112
148
-741
2,483
-250
-250
0
0
Cash Flow from Financing Activities
322
-174
-319
-1100
-516
-630
-374
-280
-292
Beginning cash
185
382
480
592
347
449
270
375
604
Increase/(decrease) in cash
343
99
112
-176
409
-179
105
229
225
Ending cash
528
480
592
347
449
270
375
604
829
DPS (PLN)
0.6
0.3
0.0
0.1
0.6
0.0
0.0
0.5
0.5
Dividends paid
Page 21 of 30
Page 22 of 30
MARKET UPDATE
Poland | Media | Small & Mid Cap | 11-December-2014
Agora
Easing press(ure)
We maintain BUY rating on Agora and increase our FV to PLN 10.3
(from PLN 10.2) following increases in our 2014E/15E EBITDA
forecasts, driven mostly by the cinema segment, and lower WACC.
Press exposure (27% of 14E revs) is steadily decreasing (exp 19%
revs in 17E) thanks to growing contributions from other segments
including cinema and internet; however the rate of decrease has
been limited somewhat by a deceleration in the pace of copy sales
erosion. We expect negative FCF in 2015E–16E due to increased
capex (PLN 106m/PLN 110m, respectively). However, in contrast
with Agora’s past spending on dotcom acquisitions (e.g. Trader.com
and GoldenLine.pl), which we saw as questionable in terms of value
accretion, this capex will be spent on strengthening Agora’s position
in outdoor and cinema – stable and organically growing segments
where Agora has a proven track record.
Good performance from cinema: The cinema market has performed well in
9M14, with 6% yoy growth and ticket sales of 27.4m. This is mainly attributable
to strong domestic releases, incl. “Bogowie”, “Miasto 44” and “Sluzby
Specjalne”. Results in 4Q14 will also be supported by The Hobbit 2. Last year
Part 1 brought ca. 850k admissions in Poland in the opening week. As
NextFilm (Agora’s subsidiary) is a distributor of “Bogowie”, we expect it to
add ca. PLN 12m of revs and ca. PLN 2m of EBIT to 4Q14 results. Agora is
outpacing the market with +1.6% ticket sales in 3Q14 and +6.4% in 9M14. Given
the pipeline for 2015, with a total of 17 new screens being added in Jelenia
Gora, Bialystok and Lodz, we believe Helios will continue to outperform.
BUY
32% upside
Fair Value
PLN 10.30
Bloomberg ticker
Share Price
Free Float
AGO PW
PLN 7.78
PLN 396.29m
61%
PLN m Y/E 31-Dec
2012A
2013A
2014E
2015E
Revenues
EBITDA
1138.6
80.8
1073.9
103.5
1081.1
88.8
1113.0
81.9
EBIT
(13.0)
7.4
(7.2)
(12.9)
Net income
(8.9)
0.5
(4.0)
(10.8)
Net debt
(21.3)
(29.3)
(12.4)
22.3
EPS
(0.2)
0.0
(0.1)
(0.2)
Y/E 31-Dec
P/E (x)
2012A
(57.2)
2013A
792.6
2014E
(95.3)
2015E
(34.1)
EV/EBITDA (x)
DY (%)
net debt / EBITDA (x)
6.0
3.5
4.1
4.8
0.0%
0.0%
0.0%
0.0%
(0.3)
(0.3)
(0.1)
0.3
ROA (%)
(0.5%)
0.0%
(0.2%)
(0.7%)
ROE (%)
(0.7%)
0.0%
(0.3%)
(0.9%)
Share Price Performance
110
100
90
80
70
Elections should support outdoor in 2015: According to the Polish outdoor
chamber of commerce, European and Municipal elections had a much smaller
impact on outdoor ad spending than initially expected. Agora’s management
believes that political parties may have decided to build up their ad budgets
for the upcoming Presidential and Parliamentary elections in 2015. We expect
the 2015E ad market to be supported by ca. PLN 80m in incremental ad
spending related to elections. We expect Agora’s outdoor segment to book
incremental revenues of ca. PLN 9m and EBITDA of PLN 1.5m.
Jan Feb Mar Apr May Jun
Jul
Aug Sep Oct Nov Dec
2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014
AGO PW
vs WIG Index
Easing pressure in press segment: Although it is still too early to say for certain
that the situation in the press segment is changing, since August 14 Agora has
reported only single-digit yoy copy sales erosion vs ca. -15% previously. In our
view, lowering the base of total press users with a higher share of frequent
readers is the main reason for this. To mitigate erosion of press revenues, in
Feb 14 Agora launched paywall access for press content and aims to achieve
0k subs base at end-2014 vs 21.2k in 3Q14. Based on our estimates, a 21k base
could generate ca. PLN 1m in quarterly revs (1% of total press revs).
Capex will hamper FCF: Agora plans to increase capex in 2015/16 (exp PLN
106/110m). However, in contrast with the company’s past spending on dotcom
acquisitions, this capex will be spent on ‘Warsaw Project’ and cinema screens
development. The former will strengthen Agora’s market leadership in outdoor
and will better position it in nationwide ad campaigns. The latter is capex on
the organically growing cinema business. Following a few unsuccessful
attempts to expand into new segments, Agora’s current strategy focuses on
strengthening its position in more predictable where it has experience, which
should offset revenue erosion coming from the press segment.
Analysts
Konrad Ksiezopolski
+48 22 347 4074
Banco Espírito Santo de Investimento, S.A. – Warsaw Branch
Poland 59 Zlota Street, 00-120 Warsaw
(v1.0.8.0)
Summary Financial Information
Valu ation M e trics ( Y e ar e n d D e c)
Agora
Ratin g
BUY
Fair Valu e ( PL N ) :
10 . 3
Share Price (09/12/2014, PLN):
7.8
Upside / Downside potential
32%
Previous Fair Value (PLN):
10.2
2 0 11
2 0 12
2 0 13
2 0 14E
2 0 15 E
2 0 16E
P/E (x)
12.4
(57.2)
792.6
(95.3)
(34.1)
(34.9)
EV / Sales (x)
0.3
0.4
0.3
0.3
0.4
0.4
EV / EBITDA (x)
2.8
6.0
3.5
4.1
4.8
4.8
15.2%
-3.6%
10.3%
3.2%
-6.3%
-7.0%
9.8%
0.0%
0.0%
0.0%
0.0%
0.0%
409
488
367
364
390
413
FCF Yield (%)
Dividend yield (%)
% change to fair value
EV (PLN m)
1%
Bloomberg
AGO PW
Reuters
AGOD.WA
Ke y Ratios
2 0 11
2 0 12
2 0 13
2 0 14E
2 0 15 E
2 0 16E
EBITDA margin
11.7%
7.1%
9.6%
8.2%
7.4%
7.5%
5.9%
9.7%
6.4%
7.5%
9.5%
9.5%
0.8
1.2
0.7
0.8
1.1
1.1
(0.8)
(0.3)
(0.3)
(0.1)
0.3
0.5
Shares in Issue (m)
50.9
Capex / Revenue (x)
M arke t Cap ( PL N m)
3 96
Capex / Depreciation (x)
Net Debt, end 2013 (PLN m)
-29
Adjustments for Associates & Minorities (PLN m)
18
En te rprise Valu e ( PL N m)
3 85
Forth comin g Cataly sts
4Q14 results
Mar-15
Net Debt / adj. EBITDA (x)
EBITDA / net interest (%)
68
24
-45
24
35
52
3.4%
-0.7%
0.0%
-0.3%
-0.9%
-0.9%
ROA
2.3%
-0.5%
0.0%
-0.2%
-0.7%
-0.7%
P& L Su mmary ( PL N m, u n le ss state d)
2 0 11
2 0 12
2 0 13
2 0 14E
2 0 15 E
2 0 16E
1, 2 3 5
1, 13 9
1, 0 7 4
1, 0 81
1, 113
1, 15 8
10.6%
-7.8%
-5.7%
0.7%
3.0%
4.0%
145
81
10 4
89
82
87
11.7%
7.1%
9.6%
8.2%
7.4%
7.5%
(93)
(94)
(96)
(96)
(95)
(96)
52
( 13 )
7
(7)
( 13 )
( 9)
% change
-39%
-125%
-157%
-198%
77%
-30%
ROE
Re ve n u e
% change
ES Equ ity Re se arch A n aly st
EBITD A
Konrad Księżopolski
% margin
+48 22 347 40 74
Depreciation & Amortisation
EBIT
Re ve n u e s Bre akdown ( 2 0 13 )
Other
24%
% margin
4.2%
-1.1%
0.7%
-0.7%
-1.2%
-0.8%
Associates
0
(0)
(0)
(2)
1
4
Net Financials
2
3
(2)
4
2
2
Other Pre-tax Income
0
0
0
0
0
0
Pre -Tax Profit
54
( 10 )
5
( 6)
( 9)
( 4)
Income Tax Expense
(11)
2
(4)
1
2
1
1
1
1
(0)
3
8
Minority Interests
Ad revenues
49%
Ticket sales
12%
Special
projects
3% Copy sales
12%
N e t In come
42
( 9)
1
( 4)
( 11)
( 11)
3.4%
-0.8%
0.0%
-0.4%
-1.0%
-0.9%
EPS (PLN)
0.8
(0.2)
0.0
(0.1)
(0.2)
(0.2)
D PS ( PL N )
1. 0
0.0
0.0
0.0
0.0
0.0
121%
0%
0%
0%
0%
0%
Shares in Issue (Less Treasury) (m)
50.9
50.9
50.9
48.4
47.3
47.3
Cash Flow Su mmary ( PL N m)
% margin
Payout Ratio
A gora - profitability ratios, 2 0 0 9-2 0 15 E
14%
2 0 11
2 0 12
2 0 13
2 0 14E
2 0 15 E
2 0 16E
10%
PBT
55
(10)
5
(6)
(9)
(4)
8%
D&A
93
94
96
96
95
96
6%
Change in Working Capital
(11)
(11)
4
(1)
(3)
(5)
4%
Other Operating Cash Flow
18
25
1
4
1
(3)
2%
Ope ratin g Cash Flow
15 2
92
10 9
93
83
84
0%
Capital Expenditure
(73)
(110)
(69)
(81)
(106)
(110)
12%
-2%
2011
2012
2013
2014E
2015E
2016E
79
( 18)
41
12
(23)
( 2 6)
Acquisitions & Disposals
(49)
168
(36)
0
0
0
Sh are h olde rs stru ctu re , A u gu st 2 0 14
Dividend Paid to Shareholders
(25)
(51)
0
0
0
0
- in share capital
Equity Raised / Bought Back
0
0
0
(30)
(14)
0
(68)
(61)
(80)
0
0
0
N e t Cash Flow
(57)
65
( 91)
( 17 )
(35)
(23)
Balan ce Sh e e t Su mmary ( PL N m)
EBITDA margin
net margin
Agora
Holding,
10.6%
PZU OFE,
14.9%
Others,
61.1%
ING OFE,
13.4%
Fre e Cash Flow
Other Financing Cash Flow
2 0 11
2 0 12
2 0 13
2 0 14E
2 0 15 E
2 0 16E
Cash & Equivalents
323
224
175
158
124
101
Tangible Fixed Assets
760
766
725
0
0
0
Goodwill & Intangibles
419
422
417
1,145
1,156
1,171
Associates & Financial Investments
- votes in GM
Other Assets
Agora
Holding,
33.1%
Others,
45.7%
Total A sse ts
ING OFE,
10.0%
12
12
10
11
15
280
314
316
323
334
1, 62 0
1, 80 4
1, 7 0 3
1, 643
1, 62 9
1, 614
Interest Bearing Debt
213
202
146
146
146
146
Other Liabilities
327
294
289
283
276
285
Total L iabilitie s
5 40
497
43 5
42 9
42 2
43 1
Shareholders' Equity
1,246
1,188
1,190
1,182
1,174
1,171
17
18
18
18
18
18
1, 2 63
1, 2 0 6
1, 2 0 8
1, 2 0 0
1, 192
1, 189
(110)
(21)
(29)
(12)
22
45
Minority Interests
PZU OFE,
11.2%
12
289
Total Equ ity
Net Debt
Source: Company data, Reuters, Bloomberg, BESI Research for estimates.
Page 24 of 30
Financial forecasts
Changes to estimates
Figure 1
Agora – changes to estimates
2014E
(PLN m )
New
Revenues
Old
2015E
Change
New
Old
2016E
Change
New
Old
Change
1,081
1,078
0%
1,113
1,114
0%
1,158
1,162
0%
EBIT
-7
-22
-67%
-13
-19
-32%
-9
-11
-18%
EBITDA
89
74
20%
89
76
17%
82
85
-4%
Net profit
-4
-22
-82%
-11
-15
-28%
-11
-7
51%
BESI vs Bloomberg consensus
Figure 2
BESI vs BBG
2014E
(PLN m )
BESI
Revenues
BBG
2015E
Change
BESI
BBG
2016E
Change
BESI
BBG
Change
1,081
1,073
1%
1,113
1,103
1%
1,158
1,128
3%
EBITDA
89
82
8%
82
88
-7%
87
94
-7%
EBIT
-7
-9
-23%
-13
-6
107%
-9
-4
120%
Net income
-4
-12
-68%
-11
-8
32%
-11
-8
26%
Source: BESI Research for estimates, Bloomberg for consensus
Valuation
We value Agora using two methods: DCF and peer multiples. Our final fair
value is an average of these two methods (each with a 50% weighting).
DCF
We use a DCF with a 10Y forecast period; however, as we are at the end of
2014, we use net debt 2014E and FCF in 2015E-2023E. We use a RFR of 2.8%
(vs 3.4% previously) and beta at 1.0x (unchanged).
Figure 3
DCF
DCF Valuation
(PLN m )
2014E
EBIT
-7.2
tax rate
24%
NOPAT
-5.5
Depreciation
96.0
CAPEX
-81.1
Change of Working Capital
-0.8
FCF
8.7
FCF change
-74%
WACC Calculation
debt/equity
10.6%
risk free rate
2.8%
credit premium
2.0%
market premium
5.0%
beta
1.0
cost of debt
3.6%
cost of capital
7.8%
WACC
7.4%
PV (FCF)
8.7
PV (FCF)
PV (RV)
net debt, end 2014E
Fair Value
# of shares
Fair Value/share
Stopklatka TV - 41% Value
Stopklatka TV/share
Fair Value/share incl. Stopklatka TV
2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E >2023
-12.9
-9.1
1.7
19.0
23.7
29.8
37.0
45.2
54.3
19%
19%
19%
19%
19%
19%
19%
19%
19%
-10.4
-7.3
1.4
15.4
19.2
24.1
29.9
36.6
44.0
94.8
95.7
93.7
86.2
84.8
83.7
82.7
81.9
81.3
-105.7 -110.0 -71.9 -68.2 -69.4 -70.7 -72.3 -74.0 -76.0
-3.4
-4.7
-4.3
-4.3
-2.3
-2.6
-3.0
-3.3
-3.7
-24.7 -26.4
18.9
29.1
32.4
34.4
37.3
41.1
45.7
44.0
-384%
7% -172%
54%
11%
6%
9%
10%
11%
0%
10.7% 10.7% 10.6% 10.4% 10.4% 10.3% 10.1%
2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8%
2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
1.0
1.0
1.0
1.0
1.0
1.0
1.0
3.9% 3.9% 3.9% 3.9% 3.9% 3.9% 3.9%
7.8% 7.8% 7.8% 7.8% 7.8% 7.8% 7.8%
7.4% 7.4% 7.4% 7.4% 7.4% 7.4% 7.4%
(22.9) (22.8) 15.2
21.8
22.6
22.3
22.5
9.9%
2.8%
2.0%
5.0%
1.0
3.9%
7.8%
7.4%
23.1
9.7%
2.8%
2.0%
5.0%
1.0
3.9%
7.8%
7.4%
23.9
9.9%
2.8%
2.0%
5.0%
1.0
4.8%
7.8%
7.5%
106
307
-12
425
50.9
8.3
53
1.1
9.4
Source: BESI Research for estimates, Company Data
Page 25 of 30
Figure 4
Agora – sensitivity analysis
Sensivity Table
TGR
####
-2%
-1%
0%
1%
2%
5.5%
8.2
9.2
10.5
12.4
15.5
6.0%
7.8
8.7
9.8
11.4
13.8
WACC
7.5%
7.0
7.6
8.3
9.3
10.7
6.5%
7.5
8.3
9.3
10.6
12.5
8.5%
6.5
7.0
7.6
8.4
9.4
9.5% 10.5%
6.2
5.9
-2%
6.6
6.2
-1%
7.1
6.6 TGR 0%
7.7
7.1
1%
8.5
7.7
2%
5.5%
-1%
10%
26%
49%
86%
6.0%
-6%
4%
18%
37%
66%
WACC
7.5%
-16%
-9%
0%
12%
28%
6.5%
-10%
-1%
11%
27%
51%
8.5%
-22%
-16%
-8%
1%
13%
9.5% 10.5%
-26% -30%
-21% -26%
-15% -21%
-8% -15%
1%
-7%
Peer valuation
Figure 5
Peer valuation – priced as on 9/12/2014
Com pany
Ticker
EV/EBITDA
Price
P/E
EBITDA m argin
LC
1YE
2YE
3YE
1YE
2YE
3YE
1YE
2YE
CAGR 2013-16E
3YE
Sales
EBITDA
Agora (BBG)
AGO PW
7.8
5.4
5.0
4.7
-32.1
-48.5
-47.3
7.6%
8.0%
8.3%
1.6%
-5.4%
Axel Springer
SPR GR
47.2
10.2
9.3
8.7
22.6
19.9
19.1
17.3%
18.2%
18.7%
5.0%
12.3%
Daily Mail
DMGT LN
810.0
10.4
9.3
8.6
14.6
12.8
11.2
18.8%
19.9%
20.3%
5.0%
2.3%
New York Times
NYT US
12.9
6.7
6.5
6.3
30.2
22.5
21.7
15.5%
16.0%
16.3%
0.0%
2.2%
Wolters Kluw er
WKL NA
23.9
10.6
10.1
9.8
15.4
14.4
13.7
24.8%
25.2%
25.5%
2.1%
1.1%
ALN1V FH
3.0
8.7
8.4
8.0
13.5
12.0
11.0
12.4%
12.6%
13.0%
0.9%
-3.9%
0.0%
0.0%
Alma Media
Telegraaf Media
TMG NA
6.0
6.6
6.3
21.9
15.7
8.4%
9.1%
Johnston Press
JPR
156.3
5.8
5.6
5.5
8.7
5.7
5.4
22.6%
23.9%
24.3%
-4.1%
Fairfax Media
FXJ AU
0.8
5.8
5.9
6.1
12.4
12.1
12.3
16.5%
16.8%
16.5%
-3.0%
APN New s&Media
APN AU
0.7
8.3
8.2
8.2
10.2
9.4
9.0
18.6%
18.9%
19.1%
0.1%
7.7%
ES IM
1.0
7.2
6.3
5.3
39.3
16.1
11.4
9.7%
11.2%
13.2%
-3.0%
10.6%
RCS Mediagroup
RCS IM
0.9
7.3
6.5
-9.7
20.6
10.9
3.1%
10.5%
11.6%
0.1%
Arnold Mondadori Editore
MEDIAN
MN IM
0.8
7.0
7.0
6.3
6.4
44.7
14.6
12.6
12.8
8.5
11.1
6.0%
7.1%
7.9%
15.5% 16.0% 16.4%
-3.3%
0.1%
8.2%
-47%
Gruppo Editoriale L'Espresso
8.3
7.8
Agora
Agora vs peers
4.1
4.8
4.8
-95.3
-34.1
-34.9
-47%
-32%
-26%
-752%
-367%
-414%
Valuation (PLN m)
567
Fair value/share (PLN)
11.1
7.4%
-54%
13.1%
74.8%
2.3%
7.5%
2.5% -5.7%
-54% 4594% -345%
Financials
Income statement
Figure 6
Agora – P&L
Agora - P&L (PLN m )
2011
2012
2013
2014E
2015E
2016E
2017E
Revenues
1,235
1,139
1,074
1,081
1,113
1,158
1,198
11%
-8%
-6%
1%
3%
4%
3%
Ad revenues
706
636
544
528
522
525
527
Copy sales
186
153
134
127
111
103
95
49
32
37
0
0
0
0
Ticket sales
146
134
129
139
149
167
188
Other
190
216
267
123
143
157
172
EBITDA
145
81
104
89
82
87
95
-14%
-44%
28%
-14%
-8%
6%
10%
% YoY change
Special projects
% YoY change
11.7%
7.1%
9.6%
8.2%
7.4%
7.5%
8.0%
Financial income/(expense), net
% EBITDA margin
2
3
-2
4
2
2
2
Share /loss of associate
0
0
0
-2
1
4
4
54
-10
5
-6
-9
-4
7
-11
-21%
2
-20%
-4
-76%
1
-24%
2
-19%
1
-19%
-1
-19%
Profit before tax
Income tax
effective tax rate
Net incom e
42
-9
1
-4
-11
-11
-7
% YoY change
-42%
-121%
-106%
-891%
173%
-2%
-35%
% net margin
3.4%
-0.8%
0.0%
-0.4%
-1.0%
-0.9%
-0.6%
42
-9
1
-4
-11
-11
-7
-42%
-121%
-106%
-891%
173%
-2%
-35%
Recurrent Net Incom e
% YoY change
EPS (PLN)
% YoY change
0.8
-0.2
0.0
-0.1
-0.2
-0.2
-0.1
-42%
-121%
-106%
-931%
180%
-2%
-35%
Recurrent EPS (PLN)
% YoY change
0.8
-0.2
0.0
-0.1
-0.2
-0.2
-0.1
-42%
-121%
-106%
-931%
180%
-2%
-35%
Page 26 of 30
Balance sheet
Figure 7
Agora – balance sheet
Agora - Balance sheet (PLN m )
2011
2012
2013
2014E
2015E
2016E
2017E
Total fixed assets
1,203
1,209
1,204
1,205
1,218
1,236
1,218
PP & E, net
1,179
1,188
1,142
1,145
1,156
1,171
1,149
20
17
57
55
56
59
63
4
4
5
5
5
5
5
600
494
439
424
397
385
418
Investments
Other fixed assets
Total current assets
Inventory
29
22
26
26
27
28
29
Trade and other receivables
246
243
234
236
242
252
261
Other current assets
199
37
80
80
80
80
80
Cash and equivalents
126
191
100
83
48
25
49
Total assets
1,804
1,703
1,643
1,629
1,614
1,620
1,636
Total stockholders equity
1,263
1,206
1,208
1,200
1,192
1,189
1,195
17
18
18
18
18
18
18
Liabilities
540
497
435
429
422
431
441
Debt
213
202
146
146
146
146
146
Trade payables
183
147
147
148
152
158
164
other
145
148
143
135
124
127
131
1,804
1,703
1,643
1,629
1,614
1,620
1,636
2017E
Including minority interest
Total equity & liabilities
Cash Flow
Figure 8
Agora – cash flow
Agora - Cash Flow (PLN m )
2011
2012
2013
2014E
2015E
2016E
Gross incom e
55
-10
5
-6
-9
-4
7
D&A
93
94
96
96
95
96
94
-11
-11
4
-1
-3
-5
-4
28
26
12
2
-1
-4
-4
tax paid
-13
-7
-7
1
2
1
-1
Cash Flow from Operations
Capital Expenditures
152
92
109
93
83
84
91
-52
-73
-110
-69
-81
-106
-110
Other
-64
159
-11
-11
-23
-1
42
-116
85
-121
-80
-104
-107
-68
-57
-46
-63
0
0
0
0
0
0
0
-30
-14
0
0
Dividends paid
-25
-51
0
0
0
0
0
Other
-11
-15
-17
0
0
0
0
Cash Flow from Financing Activities
-94
-112
-80
-30
-14
0
0
Beginning cash
182
126
191
100
83
48
25
23
WC change
others
Cash Flow from Investing Activities
Change in Debt
Issue of shares /Buyback
Increase/(decrease) in cash
-57
65
-91
-17
-35
-23
Ending cash
126
191
100
83
48
25
49
DPS (PLN)
1.0
0.0
0.0
0.0
0.0
0.0
0.0
Page 27 of 30
Valuation Methodology
TVN:
We value all media stocks using two methods: DCF and peer valuation. The
final fair value is a weighted average of these two methods, where each has a
50% weighting. Using DCF we arrive to PLN 18.0/share while using a peer
multiple valuation we reach of PLN 17.7. Our final value is at PLN 17.9/sh,
implying 14% upside potential.
Agora:
We value Agora using two methods: DCF and peer multiples. Our final fair
value is an average of these two methods (each with a 50% weighting). We
also add to Agora’s fair value the value of the 41% stake in Stopklatka TV.
Using DCF we arrive to PLN 9.4/sh while our peer valuation yields PLN 11.1/sh.
Our final fair value is PLN 10.3/sh, implying 32% potential upside.
Risks to Fair Value
TVN:
Weaker than expected performance of TV ad market in the future,
Stronger than expected dilution of TVN audience share coming from DTT and
market fragmentation
Lower than expected synergies from N-platform & Canal+ merger
Agora:
Stronger than expected erosion in press circulation,
Slower than expected development of cinema screens, triggering lower
admission,
Weak movie line up resulting in lower admission,
Outdoor not a segment of best choice in upcoming elections,
Reducing popularity of Gazeta.pl internet portal triggering dilution of internet
ad market share,
Value destructive acquisitions in the internet segment
TVN
TVN PW
Buy
Trading Buy
Neutral
Trading Sell
Sell
Restricted
Agora
AGO PW
Dropped Coverage
Buy
19
13
17
12
Trading Buy
Neutral
Trading Sell
Sell
Restricted
Dropped Coverage
11
15
B
13
10
11
9
N
9
N
B
8
N
7
7
5
Dec-11
Mar-12
Jun-12
Sep-12
Report date
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
6
Dec-11
Mar-12
Jun-12
Sep-12
Report date
Recommendation
Fair value
Share price
Buy
PLN 14.50
PLN 12.00
Neutral
PLN 8.10
PLN 7.70
2013
PLN 8.00
PLN 8.00
Source: Bloomberg, BESI Research
2013
September 2
2012
November 26
August 20
Neutral
2014 September 18
September 2
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Recommendation
Fair value
Share price
Buy
PLN 10.20
PLN 8.00
Neutral
PLN 8.50
PLN 8.25
Source: Bloomberg, BESI Research
Please visit our website at www.EspiritoSantoIB.co.uk for up to date recommendation charts.
Page 28 of 30
IMPORTANT DISCLOSURES
091214
This report was prepared by BESI Research, a global brand name for the equity research teams of Banco Espírito Santo de Investimento, S.A., with headquarters in Lisbon, Portugal, of its
Branches in Spain and Poland and of its affiliates BES Securities do Brasil, S.A – Corretora de Câmbio e Valores Mobiliários, in Brazil, Execution Noble Limited, in the United Kingdom, and
Espirito Santo Securities India Private Limited, in India, all authorized to engage in securities activities according to each domestic legislation. All of these entities are included within the
perimeter of the financial group controlled by Novo Banco, S.A., a Portuguese bank authorised and regulated by Banco de Portugal (Portuguese Banking Regulator) and Comissão do
Mercado de Valores Mobiliários (the Portuguese Securities Market Authority), which was incorporated on the 3rd of August 2014 in the context of the resolution action taken on the
former financial institution Banco Espírito Santo, S.A..
Analyst Certification
Each research analyst primarily responsible for the content of this research report, in whole or in part, certifies that with respect to each security or issuer that the analyst covered in this
report: (1) all of the views expressed accurately reflect his or her personal views about those securities or issuers; the issuers were not previously informed about the content of the
recommendation included in this research report and the assumptions were not validated by the issuers; (2) no part of his or her compensation is directly or indirectly related to: (a) the
specific recommendations or views expressed by that research analyst in the research report; and/or (b) any services provided or to be provided by Banco Espírito Santo de
Investimento, S.A. and/or by any of its affiliates to the issuer of the securities under recommendation. Moreover, each of the analysts hereby certifies that he or she has no economic or
financial interest whatsoever in the companies subject to his or her opinion and does not own or trade any securities issued by the latter.
Ratings Distribution
BESI Research hereby provides the distribution of the equity research ratings in relation to the total issuers covered and to the investment banking clients as of end of September
2014.
Explanation of Rating System
12-MONTH RATING
BUY
Ratings Distribution
DEFINITION
Analyst expects at least 10% upside potential to fair
value, which should be realized in the next 12 months
As at end September 2014
Recommendation
Total BESI Research
Count % of Total
Total Investment Banking Clients
(IBC)
Count
% of IBC % of Total
12 Month Rating:
NEUTRAL
SELL
Analyst expects upside/downside potential of between
+10% and -10% to fair value, which should be realized in
the next 12 months
Analyst expects at least 10% downside potential to fair
value, which should be realized in the next 12 months
TRADING RATING
TRADING BUY
DEFINITION
Analyst expects a positive short-term movement in the
share price (max duration 3 months from the time Trading
Buy is announced) and may move out of line with the fair
value estimate during that period
TRADING SELL Analyst expects a negative short-term movement in the
share price (max duration 3 months from time Trading
Sell is announced) and may move out of line with the fair
value estimate during that period
Buy
205
46.8%
31
86.1%
7.1%
Neutral
141
32.2%
4
11.1%
0.9%
Sell
90
20.5%
0
0.0%
0.0%
Restricted
1
0.2%
1
2.8%
0.2%
Under Review
1
0.2%
0
0.0%
0.0%
Trading Buy
0
0.0%
0
0.0%
0.0%
Trading Sell
0
0.0%
0
0.0%
0.0%
438
100%
36
100%
8.2%
Trading Rating:
Total recommendations
For further information on Rating System please see “Definitions and distribution of ratings” on: http://www.espiritosantoib-research.com.
Share Prices
Share prices are as at the close of business on the day preceding publication, unless otherwise specified.
Coverage Policy
BESI Research reserves the right to choose the securities it expresses opinions on. The main criteria to choose such securities are: 1) markets in which they trade 2) market capitalisation
3) liquidity, 4) sector suitability. BESI Research has no specific policy regarding the frequency in which opinions and investment recommendations are released.
Representation to Investors
BESI Research has issued this report for information purposes only. This material constitutes "investment research" for the purposes of the Markets in Financial Instruments Directive and
as such contains an objective or independent explanation of the matters contained in the material.
Any recommendations contained in this document must not be relied upon as investment advice based on the recipient's personal circumstances. This report is not, and should not be
construed as an offer or a solicitation to buy or sell any securities or related financial instruments. The investment discussed or recommended in this report may be unsuitable for
investors depending on their specific investment objectives and financial position. The material in this research report is general information intended for recipients who understand the
risks associated with investment. It does not take account of whether an investment, course of action, or associated risks are suitable for the recipient. This research report does not
purport to be comprehensive or to contain all the information on which a prospective investor may need in order to make an investment decision and the recipient of this report must
make its own independent assessment and decisions regarding any securities or financial instruments mentioned herein. In the event that further clarification is required on the words or
phrases used in this material, the recipient is strongly recommended to seek independent legal or financial advice. Where an investment is denominated in a currency other than the
investor’s currency, changes in rates of exchange may have an adverse effect on the value, price of, or income derived from the investment. Past performance is not necessarily a guide to
future performance. Income from investments may fluctuate. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the
interest of investors. Any recommendation and opinion contained in this report may become outdated as a consequence of changes in the environment in which the issuer of the
securities under analysis operates, in addition to changes in the estimates and forecasts, assumptions and valuation methodology used herein. The securities mentioned in this publication
may not be eligible for sale in some states or countries.
All the information contained herein is based upon information available to the public and has been obtained from sources believed to be reliable. However, BESI Research does not
guarantee the accuracy or completeness of the information contained in this report. The opinions expressed herein are BESI Research present opinions only, and are subject to change
without prior notice. BESI Research is not under any obligation to update or keep current the information and the opinions expressed herein nor to provide the recipient with access to
any additional information.
BESI Research has not entered into any agreement with the issuer relating to production of this report. BESI Research does not accept any form of liability for losses or damages which
may arise from the use of this report or its contents.
This communication has been issued and approved by Execution Noble Limited in the United Kingdom where it is being directed at persons who have professional experience in matters
relating to investments. It is not intended for retail customer use.
Ownership and Material Conflicts of Interest
Banco Espírito Santo de Investimento, S.A. and/or its Affiliates (including all entities within BESI Research) and/or their directors, officers and employees, may have, or have had, interests
or qualified holdings on issuers mentioned in this report. Banco Espírito Santo de Investimento, S.A. and/or its Affiliates may have, or have had, business relationships with the companies
mentioned in this report. However, the research analysts may not purchase or sell securities or have any interest whatsoever in companies subject to their opinion.
Banco Espírito Santo de Investimento, S.A. and/or its Affiliates have a qualified shareholding (1% or more) in Oi. Bradesco has a direct qualified shareholding (20%) in BES Investimento do
Brasil, S.A., the parent company of BES Securities do Brasil S.A. CCVM.
Pursuant to Polish Ministry of Finance regulations, we inform that neither does Banco Espírito Santo de Investimento, S.A. nor its Affiliates have any qualified shareholding in the Polish
Securities Issuers mentioned in this report in excess of 5% of its total share capital.
Mr. Rafael Valverde, a member of the board of Banco Espírito Santo de Investimento, S.A., is a non-executive board member of EDP Renováveis.
Banco Espírito Santo de Investimento, S.A and/or its subsidiaries are liquidity providers or market makers for Altri, Usiminas and Vale.
Banco Espírito Santo de Investimento, S.A. and/or its subsidiaries participate or have participated in the last 12 months as a syndicate member in share offerings of 4imprint, Alumetal,
Capital Park, CTT, EDP, Klabin, Liberbank, Mota-Engil, Mota-Engil Africa, NAHL Group, NOS, Oi, PGE, Prime Car Management, REN and SKS Microfinance.
Banco Espírito Santo de Investimento, S.A. and/or its subsidiaries participate or have participated in the last 12 months as a syndicate member in the bond issues of the following
companies: Abengoa, Altri, Bematech, EDP, Globe Trade Centre, Kredyt Inkaso, Mota-Engil and Sonae.
Page 29 of 30
Banco Espírito Santo de Investimento, S.A. and/or its subsidiaries provided in the last 12 months investment banking services to the following companies: 4imprint, Abengoa, Altri,
Alumetal, Bematech, Burford Capital, Capital Park, Casino Guichard, EDP, EDP Renovaveis, Galp Energia, Globe Trade Centre, Inditex, IQE, Kcom Group, Klabin, Kredyt Inkaso, Kruk, Laird,
Liberbank, Mota-Engil, Mota-Engil Africa, NAHL Group, NOS, Oi, Prime Car Management, REN, Semapa, SKS Microfinance, Sonae, Sonaecom, Sports Direct, SVG Capital and Ted Baker.
Affiliates of Banco Espírito Santo de Investimento, S.A. are partners to Mota-Engil in the infrastructure business in Portugal and other countries. Mota-Engil jointly with ES Concessões,
S.G.P.S., S.A. (held by an Affiliate of Banco Espírito Santo de Investimento, S.A.) has created a joint holding company – Ascendi – for all stakes in transportation infrastructure concessions
in Portugal and abroad. Banco Espírito Santo de Investimento, S.A. provided, or continues to provide, investment banking services to Ascendi.
Banco Espírito Santo de Investimento, S.A. and/or its subsidiaries do and seek to provide investment banking or other services to the companies referred to in this research report. As a
result, investors should be aware that a conflict of interest may exist.
Market Making UK
Execution Noble Limited is a Market Maker in companies covered and may sell to or buy from customers as principal in certain financial instruments listed or admitted to listing on the
London Stock Exchange. For information on Companies to which Execution Noble Limited is a Market Maker please see “Execution Noble Limited UK Market Making” on
http://www.espiritosantoib-research.com.
Confidentiality
This report cannot be reproduced, in whole or in part, in any form or by any means, without BESI Research’s specific written authorization. This report is confidential and is intended solely
for the designated addressee. Therefore any disclosure, replication, distribution or any action taken in reliance on it, is prohibited and unlawful. Receipt and/or review of this research
report constitutes your agreement not to redistribute, retransmit, or disclose to others the contents, opinions, conclusion, or information contained in this report (including any investment
recommendations, estimates or price targets without first obtaining express permission from an authorized officer of Banco Espírito Santo de Investimento, S.A.
Regulatory Authorities
Portugal: Banco Espírito Santo de Investimento, S.A. is regulated by the Comissão do Mercado de Valores Mobiliários (the Portuguese Securities Market Authority); Spain: the branch in
Madrid is regulated by the Comisión Nacional del Mercado de Valores (the Spanish Securities Market Authority); Poland: the branch in Warsaw is regulated by the Komisja Nadzoru
Finansowego (the Polish Financial Supervision Authority); Brazil: BES Securities do Brasil, S.A. - Corretora de Câmbio e Valores Mobiliários is regulated by the Comissão de Valores
Mobiliários (the Brazilian Securities Market Authority); United Kingdom: Execution Noble Limited is authorised and regulated by the Financial Conduct Authority; India: Espirito Santo
Securities India Private Limited is regulated by the Securities and Exchange Board of India.
NOT FOR DISTRIBUTION TO ANY US PERSON OR TO ANY PERSON OR ADDRESS IN THE UNITED STATES OF AMERICA
Page 30 of 30

Media outlook for 2015

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