CTC to Beat Loss With Focus on Niche Audience: Russia Overnight
Stock Chart for CTC Media Inc (CTCM)
CTC Media Inc. (CTCM), a Nasdaq-listed Russian television company, is zeroing in on its target audience and bolstering local content production in a bid to avoid repeating last quarter’s $25.5 million net loss.
Owner of Russia’s fourth-most watched television channel, CTC fell for the first time in six days yesterday, trimming its advance in the year to 24 percent. Futures (VEA) expiring today on Moscow’s RTS Index fell 0.9 percent in U.S. trading to 173,605, while the Bloomberg Russia-U.S. 14 Index (RUS14BN) of Russian companies traded in the U.S. slipped 0.6 percent to 111.55, led by Polyus Gold International Ltd. (PLGL), Russia’s largest producer of the metal.
CTC has struggled to compete on audience reach with leading, state-linked channels NTV Television and Pervyi Kanal, as viewer share slid to a five-week low at the start of March, TNS-Global data show. The Moscow-based company, whose channel broadcasts hits including ‘The Eighties’ and ‘Doctor Zaitseva’s Diary,’ is moving to target 14 to 49-year-olds, a group that makes up 80 percent of all advertising demand, according to interim Chief Executive Officer Boris Podolsky.
“Our target is to gain market share in terms of money and be a profitable channel with good potential, which is a commercial target, not just an audience-share target,” Podolsky said yesterday in an interview at Bloomberg’s headquarters in New York. “The target audience is six to 54-years-old. One of the strategic areas we’re looking at is whether we can shift that audience to a more narrow target group which would be more interesting to advertisers.”
CTC shares dropped 3.4 percent in New York yesterday to $10.87. The stock is up 22 percent since Dec. 15, when former CEO Anton Kudryashov stepped down and was replaced temporarily by Podolsky. The Nasdaq Composite Index has gained 20 percent since Dec. 15, while the Standard & Poor’s 500 Index added 15 percent.
The company, which started trading on the Nasdaq in June 2006, may consider listing stock in London or Moscow to reduce “volatility,” Podolsky said, adding that it wouldn’t happen this year.
The Market Vectors Russia ETF (RSX), a U.S.-traded fund that holds Russian shares, fell 1.4 percent to $32.67 yesterday. The ETF has gained 23 percent this year, compared with a 5.4 percent advance in the same period a year ago. The RTS Volatility Index (RTSVX), which measures expected swings in the index futures, rose 1.5 percent to 34.14.
CTC reported a fourth-quarter net loss of $25.5 million on Feb. 28, from a profit of $75.3 million a year earlier as it paid a $17.9 million impairment charge.
‘Return to Profitability’
“The business will return to profitability at any particular quarter before the year ends,” Podolsky, who was in New York for investor meetings, said yesterday. The company has no “immediate” acquisition targets, though it would buy a free-to-air Russian TV channel should one come on the market and may acquire shares in a Belarusian channel it currently provides content to should the cooperation continue to be successful, he said.
CTC will concentrate on bolstering in-house production of uniquely Russian programming to win a bigger share of its targeted audience, said Podolsky, adding that in-house production is also cheaper than purchasing U.S. shows to dub or copy.
Podolsky reiterated that CTC had sold 80 percent of advertising capacity for the year, back to pre-financial crisis levels. Advertisers are again “comfortable” with signing annual contracts whereas during the crisis they preferred quarterly deals, he said.
TV advertising rose 18 percent in 2011 to 131 billion rubles ($4.4 billion) from 110.8 billion rubles in 2010, according to a report last month from the Association of Communication Agencies of Russia.
CTC has assembled a team looking at Internet ventures and ways to bolster the company’s videomore.ru Web portal, Podolsky said. They are working on an online game, he said. The company isn’t worried about competition from Walt Disney Co.’s new channel in Russia as the world’s biggest theme-park operator and owner of the ESPN sports network is targeting a younger audience than they are focused on, Podolsky said.
Competition with Disney “creates some pressure,” he said. “But it fortunately creates pressure on the lower end of the target audience.”
CTC’s TV channel remained the fourth-largest in Russia in the week to March 4. NTV, controlled by Russian gas export monopoly OAO Gazprom, maintained the biggest average daily audience share, while state-owned Pervyi Kanal had the second- biggest audience. Rossiya-1 Television, also controlled by the government, was number three, TNS-Global data showed.
Crude oil for April delivery added 0.3 percent to $105.74 a barrel in electronic trading on the New York Mercantile Exchange today. Futures declined 1.2 percent to settle at $105.43 a barrel yesterday, while brent oil for April settlement fell 1 percent to $124.97 on the London-based ICE Futures Europe exchange. Urals crude, Russia’s chief export blend, fell 1.1 percent to $123.28.
United Co. Rusal (486), the world’s largest aluminum producer, slumped 6.8 percent to HK$5.47 in Hong Kong trading as of 11:45 a.m. local time as a shareholder feud drags on the stock. Billionaire Victor Vekselberg quit as chairman on March 12, citing divisions with Chief Executive Officer and controlling shareholder Oleg Deripaska over dividends and divestments at the company.
Polyus Gold (PLGL) fell 4.7 percent to $3.25 in U.S. trading, the lowest level since Jan. 30, as gold prices dropped to an eight- week low on the Comex in New York. The mining company was the worst performer on the Bloomberg Russia-US 14 (RUSN14BN) gauge yesterday.
EPAM Systems Inc. (EPAM), a U.S. software development company with production offices in Belarus, Ukraine, Russia, Hungary, Kazakhstan and Poland, had its initial public offering on Feb. 7. The stock gained 2.7 percent to $16.20 in New York yesterday, up 16 percent from its first trading session on Feb. 8.
“EPAM is turning out to be a hidden gem in terms of performance,” Luis Saenz, chief executive officer of the U.S. unit of Moscow-based brokerage Otkritie Financial Corp., said by e-mail to clients yesterday.
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