e.tv OVER DStv? NOT AS CRAZY AS IT SOUNDS …
- December 1, 2022
- Posted by: Cheryl
- Category: Media & Broadcasting
The free-to-air channel has racked up market share and is still paying out chunky dividends via parent eMedia.
eMedia Holdings could be the JSE’s big “sleeper” for discerning viewers of value.
A sleeper is a movie term referring to a film that might not be appreciated at its launch, but slowly grows to earn a large cult following. At a lowly 6.5 earnings multiple (for a tech-driven media company), a 12.5% dividend yield and a 35%-40% discount to NAV, eMedia is very much overlooked.
The sleeper contention, however, might only apply to retail investors able to subscribe for smaller parcels of shares. As things stand, there is just not enough liquidity in eMedia’s shares to justify serious uptake from institutional investors.
eMedia, which is controlled by Hosken Consolidated Investments (HCI), owns a 67.7% stake in eMedia Investments — owner of free-to-air television broadcaster e.tv and news channel eNCA. The balance of eMedia Investments is owned by investment giant Remgro.
The average weekly volumes over 12 months for the less liquid eMedia ordinary shares and slightly more tradable N shares are measured in tens of thousands rather than millions. This scrip scarcity has largely relegated eMedia to the fringes of the JSE, which is a great pity considering the intriguing backstory behind the business.
Founded by HCI in the late 1990s, the original e.tv was pitched snugly between state broadcaster the SABC and MultiChoice’s DStv. Covering the start-up costs before cash flows rolled in tested a young HCI. Determined to back the new venture, HCI flogged its shares in then unlisted cellular services company Vodacom to Remgro to bring in the necessary development capital. At that point, many investors believed HCI and its prime mover Johnny Copelyn had committed a rookie error in giving up an investment in a redoubtable and fast-growing cash cow for a fledgling, high-risk punt.
HCI’s determination, however, paid off and — possibly helped by a weakening state broadcaster — e.tv became a serious cash generator for the group. In fact, e.tv ranked as HCI’s biggest investment until Copelyn shifted the group’s attention to the gaming sector.
But somewhere along the line, the picture for eMedia got a little blurred. For a short time between 2013 and 2014, the business was lumped alongside old economy industrial assets in the old Seardel (which HCI had rescued from bankruptcy via a last-gasp rights offer). The industrial assets were unbundled and separately listed under Deneb Investments, leaving eMedia as a standalone listing.
That development unfortunately coincided with the resignation of HCI co-founder and eMedia CEO Marcel Golding and e.tv COO Bronwyn Keene-Young.
It was also around this time that eMedia started investing in Openview, which offered a bouquet of free-to-air satellite broadcast channels. Openview has been a huge cost centre for eMedia, which took the shine off the group’s profit numbers for half a dozen years. Only now has the platform built the critical mass to allow investors to assess the venture on a commercial basis.
While eMedia now offers a much broader spectrum of viewing options thanks to its Openview platform, the dependable engine throughout has been e.tv — which must rank as one of the most underestimated media brands in South Africa.
At the end of September, eMedia — thanks largely to et.v — held a combined market share of 36.2% of prime time, up markedly from 31.8% a year ago. eMedia held a combined 33% market share during the peak viewing hours of 6pm to midnight, shading the SABC at 27.3% but also the mighty DStv at 30.5%. CEO Khalik Sherrif says being the biggest broadcaster in South Africa stands the group in good stead when the economy turns.
Lately, the economy has not been good for broadcasters. Sherrif notes that though the “number of eyeballs” available for television viewing has been affected by load-shedding, the average minute rating (AMR) for e.tv has decreased by only 5%, compared with a 16.5% drop in AMR for the industry.
The AMR reduction would normally hin
der advertising spend, which makes eMedia’s 2% gain in advertising revenue in the six months to end-September quite satisfactory. The industry decline in advertising spend was 8%.
In the interim period e.tv improved its market share from 21.8% to 23.7%, thanks mainly to soapies such as Durban Gen and dubbed Turkish/Afrikaans telenovelas as well as new soapie House of Zwide.
eMedia’s multichannel offerings on Openview also encouragingly saw an increase in market share from 10% to 12.5%. Sherrif says outstanding performances were registered by eExtra and movie channels eMovies and eMovies Extra, as well as eReality.
Openview reached the 3-million set-top box activation mark in mid-September, and is growing at about 500,000 boxes a year.
Worth watching is Openview’s recent launch of a “smarter” set-top box with Wi-Fi capacity, which might be a game-changer in households that need to count pennies in these tough times.
In terms of weighing up an investment in eMedia, there is little doubt that earnings before interest, tax, depreciation and amortisation (ebitda) of R667m from the 2022 financial year to end-March will not be matched. Interim ebitda was R270m, and with a traditionally stronger second half the full-year number would probably do well to reach R600m. But if eMedia can earn
Openview reached the 3-million set-top box activation mark in mid-September, and is growing at about 500,000 boxes a year.
Worth watching is Openview’s recent launch of a “smarter” set-top box with Wi-Fi capacity, which might be a game-changer in households that need to count pennies in these tough times.
In terms of weighing up an investment in eMedia, there is little doubt that earnings before interest, tax, depreciation and amortisation (ebitda) of R667m from the 2022 financial year to end-March will not be matched. Interim ebitda was R270m, and with a traditionally stronger second half the full-year number would probably do well to reach R600m. But if eMedia can earn 30c a share in the second half, full-year earnings would come in at a respectable 52c a share and, with solid cash flows, underpin another decent dividend.
Small Talk Daily analyst Anthony Clark says the second-half performance will depend heavily on how the festive season trading period pans out. “But investors do get a certain solidity in the dividend flow as well as a business with commanding market share, new channels and new points of delivery. This should mean eMedia does well in a changing environment for advertising and consumer content.”
The FM puts much store in the fact that eMedia could afford to hold its interim payout at 21c a share (last year: 22c a share), which must pronounce confidently on the group’s immediate prospects. Sherrif says the interim payout is the measure of a healthy business: “We are very positive.”
Source: Business Day – Marc Hasenfuss