Goldman Sparks CTC Jump as Shows to Lift Sales
CTC Media Inc. (CTCM) is rebounding from the cheapest level versus peers since 2009 as Goldman Sachs Group Inc. recommends buying the Russian television company on prospects a focus on younger viewers will stoke revenue growth.
Shares of CTC traded in the Nasdaq Composite Index (CCMP) jumped 7.3 percent yesterday to $8.70 in New York, the biggest advance since Aug. 7. The Moscow-based company traded for 9.3 times estimated earnings, the highest valuation since Dec. 13. CTC’s rally, the steepest on the Bloomberg Russia-US Equity Index yesterday, narrowed its discount to companies on the MSCI Emerging Markets Media Index (MXEF0MD) to 61 percent, from as wide as 67 percent Dec. 28, data compiled by Bloomberg show.
CTC’s revenue will climb 10 percent next year and about 11 percent in 2014 and 2015 as it wins more viewers with original programming and as the company cuts costs, Goldman analysts led by Alexander Balakhnin, wrote in a report dated Jan. 11. CTC, which tumbled 11 percent last year as it took on a new chief executive officer, is debuting new shows including ‘Angel and Demon’ and ‘The Eighties’ as it seeks out viewers aged 10 to 45.
“The stock is undervalued, it’s a clear buy for those who want exposure to Russia’s growth story,” Konstantin Chernyshev, the Moscow-based head of research at UralSib Financial Corp., which has had a buy rating on CTC since May 2011, said by phone yesterday. “CTC Media has a lot of potential for growth as the company has a good management team, has stabilized its share of viewers and is winning new ones.”
The Bloomberg Russia-US Equity Index (RUS14BN) rose 1.1 percent to 101.38 yesterday and RTS stock futures expiring in March held at 159,090 in the New York day. Trading volume in CTC Media’s stock was almost four times the average daily volume for the past three months, data compiled by Bloomberg show.
The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, rose 1.3 percent to $30.14 yesterday. The RTS Volatility Index, which measures expected swings in the stock futures, decreased 0.3 percent to 20.58.
Under CEO Boris Podolsky, who moved from the chief financial officer position on June 14, CTC will post an 11 percent jump in 2013 revenue, after an predicted 2.8 percent increase in 2012, according to the mean of 12 analysts’ estimates compiled by Bloomberg. The company’s 2013 revenue will rise to $872.7 million, according to forecasts.
Russian television advertising will probably rise between 10 percent and 15 percent in 2013 from 2012, fueled by an expanding economy, UralSib’s Chernyshev said.
Russia’s gross domestic product will climb 3.4 percent in 2013, according to the median of 25 economists’s estimates in a Bloomberg survey last month. Economic growth probably accelerated 3.5 percent in 2012, the government forecast last year, slowing from 4.3 percent expansion in 2011.
Total spending on Russian TV ads is expected to increase to $5.9 billion in 2014, the biggest market in Europe, from $4.4 billion in 2011, CTC Media says on its website, citing estimates by industry think-tanks, including Zenith Optimedia and Video International.
CTC, which operates television channels in Russia, Kazakhstan, Moldova and broadcasts its programs in countries including Germany, the U.S., Thailand and Israel, is switching its focus to a younger audience beginning this year as it seeks to attract more advertisers.
The broadcaster will direct its content to viewers aged 10 to 45 years-old, compared with the previous target of six to 54- year-olds, CEO Podolsky told analysts on a conference call Aug. 7.
Proceeds from advertising accounted for more than 97 percent of company revenue in 2011, the highest level since 2005, data compiled by Bloomberg show.
CTC TV, the company’s main television channel, has changed its strategy and is winning more viewership by broadcasting domestically made shows, rather than Hollywood-made blockbusters, Goldman’s Balakhnin wrote, adding that the new strategy also helps to cut costs.
The largest non-government television broadcaster in Russia, CTC said its audience of viewers aged six to 54 for all of its television channels increased to 14.8 percent in the third quarter, from 14.7 percent a year ago, and was the third- biggest after NTV Television and TNT TV. The company cited TNS Global as a source for the data.
CTC TV’s weekly audience of viewers aged 18 years and older rose to 6.9 percent in the week to Jan. 6, from 5.3 percent in the week to Dec. 30, TNS Global data showed Jan. 10.
“The launch of the spring season, with new episodes of existing titles and scheduled premieres, should support audience share dynamics and unwind inventory erosion concerns,” Goldman’s Balakhnin wrote. “The quality of programming has improved and the company is able to retain audience share through more cost-efficient means.”
VimpelCom Ltd. (VIP), Russia’s third-biggest mobile phone company by subscribers, rallied 1.5 percent to $10.75 yesterday in New York.
Markus Bjerke, an analyst at Arctic Securities ASA in Oslo, raised its recommendation on the shares to buy from hold and lifted the price estimate on the shares to $13 from $10.60.
Crude for February delivery gained 0.6 percent to $94.14 a barrel on the New York Mercantile Exchange yesterday, the highest level since Sept. 18. It slid 0.5 percent to $93.68 by 8:25 a.m. today.
Brent oil for February settlement increased 1.1 percent to $111.88 a barrel on the London-based ICE Futures Europe exchange yesterday, before dropping 0.3 percent today to $111.58. Urals crude, Russia’s chief export blend, rose 1.1 percent to $109.96, and was down 0.1 percent today to $109.83 a barrel.
The ruble added 0.2 percent to 30.2540 per dollar yesterday, the highest level since May 11. It was little changed at 30.275 today. Ruble futures showed the currency strengthening 0.2 percent to 30.520 per dollar in New York yesterday.
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