KOHINOOR BROADCASTING-- A HIDDEN GEM


KOHINOOR BROADCASTING CORPORATION LIMITED

BSE Code: 531336

Book Value: Rs.15.95

Market Cap: Rs.104.14 Cr

Face Value: Rs.10

Market Performance: Out-performer

Target: Rs.70--Rs.80 in 12 -18 months time frame


Introduction: Kohinoor Broadcasting Corporation Ltd was incorporated by a group of professionals with Mr. Harjinder Singh and Mr. Mangal Singh as key promoters of the Company since its incorporation on 11 October 1994. During 2003 the Board decided to establish facilities for production of advertisements, TV programmes music programmes and certain other entertainment related activities. The Company is currently engaged in the media and entertainment industry with a particular focus on the TV sector or Visual Media

The Company has diversified in the production of TV programmes including current affairs, music, serialised drama and other entertainment programmes.The Company has got approval from Ministry of Broadcasting for setting up earth station for up-linking the television channels. The Company is setting up earth station and news studios at Rajpura and remote studios in India at Delhi, Mumbai, Calcutta, Chennai and Jammu and outside India at Dubai and London. In this regard, the designs have been finalised and the equipment has been brought. The consultants have been appointed and they are sourcing the space at the locations.

The Company shall also set up fifteen mobile studios for better coverage of the events, which would be moving from one part to another. It is proposed that each region shall have three mobile studios to cover on the spot.

Besides, the Company would have six mini vans cum mobile studio to cover offices of the Chief Ministers of Punjab, Haryana, Himachal, Jammu & Kashmir and Delhi in the first stage. The equipments have been identified. The orders shall be placed in due course. The supply period is three months.

Shareholding Pattern: The promoter holding is at present very less and is more or less managed by the Board of Directors like may other established companies, who are doing well. But due to the high prospects of the company going forward, the promoters are proposing to increase their stake through private placements. The company has already informed about its desire to offer, issue and allot up to 100,000,000 Equity Shares of Rs 10/- each on private placement basis in one or more trenches to person resident outside India, by way of Global Depository Receipts/American Depository Receipts or Foreign Currency Convertible Bonds on such terms and conditions as may be fixed by the Directors of the Company, subject to necessary provisions & approvals. This is a very positive news on the company, since if a company did not have fundamentals then it shoud not have gone for GDRs.

Financials: The company came out with excellent consolidated results (the results including its overseas subsidiaries in Dubai and UK) for the December, 2007 quarter (Q3FY08). Though the total income of the Company in Q3FY08, remained flat to Rs.52.05 lakhs against Rs.59.62 Cr in the same period previous year, but PBDT (Profit before tax and depreciation) jumped to Rs.6.02 Cr as against Rs.1.09 Cr in the same period previous year. For the nine months ended 31st December, 2008, the PBDT came out to be Rs.12.40 Cr as against Rs.3.04 Cr in the same period previous year.
For the Q3FY08, the Net Profits of the company zoomed to Rs.5.46 Cr against Rs.76 lakhs in the same period previous year. The EPS for the Q3FY08 is Rs.6.21 against Rs.2.33 in Q3FY07. This is remarkable considering that the company had an EPS of only Rs.2.22 in FY07.

Triggers:

1. The company has received the equipment for Teleport to be set up at Rajpura involving a capital outlay of Rs.5 Cr.

2. The company has placed the orders for play-out station to be set up at Rajpura involving a capital outlay of Rs.10 Cr.

3. The company is in the process of making large scale recruitments of manpower approx. 60 people for the production of content for its entertainment channel.

4. The company has started producing buffer content for its forthcoming News and Entertainment Channels.

5. The Company is coming up with 4 (four) New Channels which are as follows:

a) KBC News--The popular Hindi New Channel

b)KBC Plus---The popular Entertainment Channel

c)KBC Gold--The popular Hindi/English/Regional Movie Channel and

v) KBC Profit--The popular Business Channel like NDTV Profit.

6.The company in principle has taken over M/S Tagore Theatres Ltd, a multiplex valued at Rs.100 Cr. The company has appointed reputed agencies to decide the Swap ratio for the proposed take over.

7. The company is opening new subsidiaries in Japan, Singapore and the USA. The top company's officials were in the USA last month to finalise a deal there.

8. The Company is likely to benefit from the DTH and CAS, which is bringing a revolution in the media sector as a whole.

9. The promoters of the company are expected to increase their stake in the company through a private placement, if the sources are to be believed. The company has already announced that it will be conducting an EGM on 4 th March, 2008, to offer, issue and allot up to 100,000,000 Equity Shares of Rs 10/- each on private placement basis in one or more trenches to person resident outside India, by way of Global Depository Receipts/American Depository Receipts or Foreign Currency Convertible Bonds on such terms and conditions as may be fixed by the Directors of the Company, subject to necessary provisions & approvals.

10. The Company proposes to invest an aggregate sum not exceeding Rs 200 Crores, in the equity shares of the Wholly Owned Subsidiaries (WOS) of the Company viz. Kohinoor Broadcasting Corporation FZE and other subsidiaries to be incorporated world wide notwithstanding that Such investment together with the investment in all other bodies corporate may exceed 60% of the paid up capital and free reserves or 100% of its free reserves whichever is more, subject to necessary provisions & approvals. HENCE THE MEETING OF 4TH MARCH, 2008 IS VERY IMPORTANT.

Conclusion: Considering all the points mentioned above including the last quarter EPS of Rs.6.21, it has been found that the scrip of Kohinoor Broadcasting Corporation Ltd is highly undervalued and could purchased at the CMP of Rs.8.98 for a target of Rs.70-Rs.80 in 12 to 18 months time frame. But if the company is able to lauch its new Channels a little early than the proposed dates and is able to open its overseas subsidiaries within a short time, then the scrip could cross Rs.100--Rs.120 in the stipulated time. This is a hidden gem in the media sector and a turnaround case like Ispat Industries Ltd