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Saturday, June 27, 2009

Dish TV - Can This Be A Good Investment?

Dish TV has more than doubled since last November. It seems to be a blind bet. This stock is risky.

There are 13 million TV viewers in the country who are served by cable and direct-to-home (DTH) services. DTH providers hope to convert a lot of them to their technology platform. Dish TV India is one of them. DTH offers superior viewing pleasure and for long it was assumed to be a growth business. Dish TV is one of the five DTH service providers and has 75 lakh customers; it wants to add another 25 lakh in FY10. The revenue is expected to grow to Rs1,000 crore by then. Dish TV, which currently offers 240 channels, plans to increase that number to 400 by the end of this fiscal.

The expansion story sounds attractive but the facts on the ground are different. Well, growth in DTH services has declined almost 35% in Q4 2009 compared to the same year-ago quarter. Moreover, Dish TV has not made even a paisa of operating profit in the past eight quarters. The huge operating expenses of this business will continue to affect profitability. Transponder lease, licence fees, uplink charges, programming and other costs are very high. In the early days of DTH business, the players, including Dish TV, had kept the entry price low to wean away cable TV customers. However, DTH is not yet a superior value proposition, despite low entry prices.

Cable still dominates. Currently, Dish TV has three monthly plans -- @ Rs113, Rs190 and Rs283 (plus taxes). Such low charges should have led to a massive subscriber base to ensure a healthy business. However, there has been an alarming decline in the rate of customer addition by the sector in the Q4 2009. If low customer addition is the result of the economic slowdown affecting purchase decisions of DTH Vs cable, DTH cannot be a growth story and Dish TV’s 128% gain in the stock since November last year looks speculative.
Source: MoneyLife

Few facts:
** Cable operators are not sitting quite just looking at their business going away from them. At many places cable operators have reduced their monthly fees to such lows that even DTH operators can not fight with them. At my new home in Mumbai suburb, cable operator is offering subscription at Rs. 50 per month (Yes Rs. FIFTY only). How? Our builder have provided us with the common cable system. So cable operator just needs to provide an amplifier with one high frequency connection instead of laying down the cables for every flat. Calrity is good enough, signal is not distorted at all. Who needs to buy a DTH paying few thousand bucks for system and installation with restricted chanel at lower end recharges. If you observe carefully, you get very few channels in lower end packages and all channel packages would cost you more than Rs. 300 in any DTH.

Another big competitor for DTH services is IP TV. Internet Protocol TeleVision. IP TV service is distributed along with broadband internet connections. Companies like MTNL and BSNL have already started providing this service through their vast existing distribution network. Such services are on the way from other two big players Reliance and AIRTEL.

Considering this competition, DTH companies may fail to live upto expectated growth that is being anticipated from investors.

2 comments:

  1. Author seems to b a very illinformed.....DISH TV has around 5.07 Million subscribers not 7.5 million as said by him. The main change in didgital home entertainment is not of having a DTh box in hom or dal with a local cabl operator but of Digitalization and CAS..where user gets digital signals and pays for what h watchs rathr that what is pumped in his TV.

    DTH as a platform control 25-40% TV homes globally and India will be no different market.

    Cable operators will have to convrt their signals to digital if at all they want to survive in th market....they will have to tir up with th MSO like hathway, WWil, DEN etc to offer digital cable and they will also hav to us a Set top box so capital expenses for all of them will rmain the same.

    DISH TV is only listed company in DTH Space its expanding agressively and has great future....it very well funded by promoters and has recentlkt raised money through rights issue and is soon going to Launch the FCCB its grown 70% YOY in trerms of revenu and 90% YOY in subcribr addition. Its EBITDA positive in Q42009 and will turn cash flow positiv by Q3 2010.

    DTH is a capital intensive business with long gestation period....industry will see major consolidatioon and forien participation in nxt 3-5 years....DISH TV will b major beneficiary....Price target of 140 is achieveable in next 18-24 months.

    Author forgot that returns from DISH TV were 500 from its lows of 11 to 55.

    DISH Karo WISH Karo

    ReplyDelete
  2. I do not deny the gowth here ... but it would not be as fast as being considered while valuing the stock.

    Checkout the numbers for this counter:

    Market Cap 3,089.40
    EPS (TTM) -
    P/E - | *
    P/C -
    Book Value 4.17
    Price/Book 9.47
    Div(%) 0.00
    Div Yield(%) -
    Market Lot 1.00
    Face Value 1.00
    Industry P/E 21.40
    Source MoneyControl.com .. as on 28th June 2009

    Company does not have any EPS as of now since it is not making any profits. Infact if you have a look at Profit & Loss accounts what you see is as below:

    Reported net profit for Mar. 06 = -207.83 Crore

    Reported net profit for Mar. 07 = -251.88 Crore

    Reported net profit for Mar. 08 = -413.20 Crore

    Reported net profit for Mar. 09 = -476.28 Crore

    What does this NEGATIVE profits means is the LOSS.

    And this loss has been in increasing order. March 2008 Loss was 207.83 Crore that doubled to 413.20 Crores in 2008 and the LOSS in year 2009 is 476.28 Crores.

    Compared to this financial performance which is most important factor while valuing the stock, DISH TV is a loss making company. With theses increasing losses the rise in the stock price is not justified and this is what this article highlights.

    So what is behind this increasing stock price? nothing but PURE SPECULATION. Speculation that this is new technology and this would perform better in future. This company is a loss making company for past 4 years in a row. We don't know hwen it going tp report profits for shareholders.

    It is upto you to decide wheather to speculate for this loss making business or to consider some other profit making one.

    Ultimately what stock price resemblance in stock market is the financial performance of the business.

    Thanks
    Vinay

    ReplyDelete

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