ETC Networks:"A worthy merger story"

Scripscan-ETC Networks
CMP-150
Traded in:NSE-BSE
Story:Merger story

Business:ETC Networks derives its revenues mostly from commercials and trailers advertisements.The company has couple of free to air satellite television channels: ETC-the music channel and ETC Punjabi(ETC Punjabi was launched on June 2000) –a general channel.ETC Punjabi has forayed into Event Oriented Programs and produces all programs in-house.ETC Punjabi has also bagged exclusive rights for 11 years to telecast Gurbani Live from the Golden Temple,Amritsar.All these developments should significantly boost the revenues for the company in the years to come. Industry Overview:Shifting consumer preferences, evolving technology and convergence of traditional and new media has brought resurgence in the entertainment and media industry.The recent estimates show that TV penetration has crossed the 110 million household mark, of which 61% homes have cable & satellite connection. This massive reach attracts new players into all segments of media to seize on the multi-million opportunities.

Opportunities in the Entertainment Sector:
The introduction of CAS and DTH has come as a boon to the whole industy.The television advertising revenue estimated at Rs. 6600 Crores is expected to grow to Rs. 12,300 Crores by the year 2011.The subscription revenues are expected to touch Rs. 37,800 Crores by the year 2011.The media and entertainment industry expects to touch the landmark figure of Rs. 1,00,000 Crores by 2011. As per FICCI - PwC Annual Media Report, the year 2006 was the turning point for the media industry and it is estimated to be worth Rs. 43,700 Crores.

Recent financials:
In Q2FY08,ETC has reported a topline of Rs. 13.50 cr vs Rs. 9.57 cr, a growth of 41.1% y-o-y.It reported a PAT of Rs. 3.42 cr (up 232% y-o-y) and an EPS of Rs. 2.46 versus Rs. 0.69 in the corresponding quarter.Lower programming costs,icreasing advertising revenue from ETC Punjabi and increased exposure time on ETC Music(increased broadcasting of songs,trailers for an additional one hour time)attributed significant jump in sales. Merger:Very recenly,( November 2, 2007)the merger of ETC with ZILS has been approved by both the companies shareholders.The exchange ratio will be 1 equity share of Rs. 10 each of ZILS for 2 equity shares of Rs. 10 each of ETC.All formalities are expected to be completed by February-march 2008.

"Zee Interactive Learning Systems Limited'(ZILS)"
Business:Zee Interactive Learning Systems Limited'(ZILS) an ISO 9001 certified education provider company and is the education arm of Zee Network. The company was formed in 1999 to create a learning network and deliver a variety education content and solution for range of career and vocation through multiple delivery platforms.ZILS delivers learning solutions and training to various segments of society through its divisions:-

1)Zed CA:Zed Career Academy
2)ZIMA:Zee Institute of Media Arts
3)Kidzee:Play group,Nursery,Activity Center
4)ZICA:Classical and Digital Animation training Academy
5)E-Learning:online education

Aggresive Expansion:
ZILS presetly is planing to tap semi-urban and rural centres aggresively with a `grahmin' model Kidzee school.The company is also working on promoting Kidzcare, a daycare facility, and Kidzee High, a full-scale school with CBSE curriculum.ZILS already has signed up for starting 25`Kidzee High' schools and eight of them are going to operate this year.The company had also started a Kidzcare centre in Bangalore and would open one in Hyderabad soon.The annual fee for the kids admitted to Kidzee would be between Rs 6,000 and Rs 36,000 depending on the centres where they are located.With the launch of the company's first Kidzee play school in the city,ZILS hope to start at least 10 such schools in the Coimbatore region over the next 9 months.ZILS has already set up 550 play schools in 260 locations accounting for an annual student strength of 50,000 and these schools employed about 2,000 trained teachers.

Tax Benefits:
The merged entity will also avail tax benefits for another few years due to accumulated losses of about Rs.40 cr in ZILS books.Though they would be liable to pay MAT pegged at 11.3%.ETC networks has already provided for tax on a conservative basis in the first two quarters of FY08,which could be reversed later.

Conclusion:
It would be prudent to note that,ETC has surplus cash on its balance sheet, to the tune of about Rs. 20 crores which can be utilized for ZILS's business, where the potential is immense.The merged entity is expected to post revenues of around 95crs in 08 with a Profit after tax of around 17crs.Equity would be around 10crs so Eps comes at 17rs for 08.Now for every 2 shares of etc networks one would get 1 shares of ZILS.So real effective price would be 300rs(Etc is quoting at 150rs and one would get 1 shares for every 2 shares held).Even at that price its quoting at just 17.7 times its estimated fy08 earnings.Stocks in the similar category,Computer – Education,like Educomp Solutions, Everonn Systems are quoting at P/E multiples in excess of 60-70 times expected earnings.Even IF we give a P.E of 35 to the merged entity,its coming as a doubler.Well lets leave the valuation to you guys to decide."Altogether a great buy".

Reliance !!! Can It beat the Market !!!

Reliance Inds looks the only biggie which has not got the run up needed !!! Technically the stock is in the waiting to possibly give a good move if crosses 2930-2960 zone and closes above. Investment in the stock always makes sense if u r patient enough... Markets can see smooth days only if this biggie fires...
The stock was advised to clients on friday at 2770-2730 range to accumulate with a short term tgt 2920 and above ... Still holding on :)

Sensex technical View:
Markets have seen a good bounce from 50 dema and the major resistance for the market is at 19800 zone.. The strategy would be to reduce the bought index stocks in dips around that zone and look to re enter on declines or on close above 20200... A gap up today also is not a gr8 sign.

Review :Walchand announces bonus and split as said frm much lower levels that split announcement by dec :) ... Revathi does 1300 + stay invested if u r patient or book some and forget rest , Great offshore and prajay hold. Majestic does intra freeze but not much chance given.,...Deccan gold mines and bihar sponge our weird ideas have more thn doubled ... Reliance given to clients at 2750 does 2900 still holding for more....

Stocks to watchout for :

Reliance Inds and JSW Steel are the stocks which look excellent in the FNO segment for positional players and short term delivery on every decline are accumulate.... Positional tgts would be 3200 ++ and 1100 ++ with deeper stoplosses though .( Disclosure already recommended at 2750 and 960 in last 2 days to clients )
Punters Picks for risky players:
Avantel Software, Kaveri Seed and Panoramic Universal for short term 20-30 % + moves and risk of 8% from current levels....So pick ur pick and put ur tgts and stops :)
Ankit Metal for intraday ckt hitter and quick trade in the morning...

Syndicate Bank - Good for Medium Term

Syndicate Looks good above 97 for a tgt of 105-125 in medium term....View given in chart

Small cap steels rock the streets !! NOW the WORLD TALKIN!!

ISPAT inds frm 18 to 42 , Sun Flag from 16 to 34 , Vikas Metals 18 to 26 , Pennar Steels ( laggard down 2-5% ) , South Iron n Steel from 31 to 45 , Adhunik metals etc etc.......................All the small cap steels have rocked !!!! And we still maintain our multibagger view on the sector ...........We came out with a whole report and contiously mentioned it on Sept 13 and continously repeating to buy , accumulate on every fresh move in them.....
Ispat was again said at 32 to buy more......Now the world is talking and will continue to talk as more is yet to be seen !!!!!!! i would repeat my words " Somethings were cooking fundamentally we could smell it technically " !!!

Breather & Dip from Crucial zones.....

As we had cautioned in last few days crucial zones onf 20000-20400 are near and be alert on ur trading positions when people were ga ga on Fed cut and run :) ...

Technical View :Sensex looks to have made a double top on extreme short term basis aroud 20200 which is not a gr8 sign around the resistance zones of 20000-20400 .. The gap left around 19270 regions should be filled in days to come and avoid short term longs till we see a new high or a good dip ... Its better to re - enter in comfortable zones ... Extreme short term support at 19100-19300 ... Review : Walchandnagar almost 10k ....have said aggresively at 1600 buy n keep for 1 yr some people also got a lil jittery when it declined a bit we maintained our view ,....
TEXMACO 1100 ka 1800 , NESCO 1600 ka 2900 cheers to our long term bets ...GULF oil has been stable but gr8 for long term ....KCP does 497 looks a gr8 long term bet , Ind Hume pipe 600 ka 1200 ( walchand grp c0 ) , Bata does tgt ,

WATCHOUT for SENSEX 20400 !!!

We are nearing the crucial levels of 20400 zone which is a good resistance and with the gaps left on the lower side its better to be little cautious and not over optimistic as part of good discipline. So look to be alert for signals and book partial profits in over run stocks to conserve gains or keep strict trailing stops...
This is because for scalpers ,jobbers and traders dont make a great deal of money in such huge rallies and end up giving a lot in corrections...Investors and good traders can gift some of the money back to the markets in corrections though :)
Technical View :
The gap at lower still continues to be a matter of concern and resistance would be seen around 20400 levels .. With the Fed cut the momentum and sentiments are up and we could be knocking those range and the cut has on a major sense already been discounted and with the result season over we need some other cues to pull up or down the market... Look to book partialy at 20400 area and keep trailing stops to conserve gains and be highly stock specific as there would be quite a lot of out performers also if markets dip a bit...
Stocks to watchout for :
Om Metals
The stock is all set for good moves in short term .. Accumulate on declines for a good 20-30 % in next 2 weeks to 2 mths
Investment picks .. Safe for 1 yr slow and steady gains
Revathi Equipments...
The stock is excellent fundamentally and is going cheap on the valuations and future prospects ...Dont worry about the entry point just keep buying small on every decline or every few days, weeks , ,months as per ur patience and create a recurring deposit for 1 yr ...
Easun Reyrollle
Another stock which is hot on charts as well as fundamentals buy half now and on declines for cool 30% in medium term
Traders Stocks :
Tinplate , godawari ispat, Easun reyrolle for intra day 5- 10% moves