Sentiment expected to remain negative on Zee scrip

Down, down, down with no end in sight at least in the near term is the verdict that media sector investment analysts have given regarding the beleaguered Zee scrip.

The Zee Telefilms Ltd (ZTL) stock has taken a continuous beating over the past few months with the last week being particularly painful. The share has dropped to it touch 52 week lows thrice at Rs 240, Rs 235 and Rs 216. It is currently trading at Rs 228.

A foreign securities firm has put a 'sell' recommendation on ZTL. Market sentiments are working against the scrip. To get a handle on the mood in the the market we talked with a couple of analysts and took their perspective.

The weakness in the scrip, they revealed, is attributed to many reasons. The principle contributor being "not so good programming."

"The Television business is becoming more and more visible in the sense everybody watches TV and knows fairly well as to which are the channels providing good entertainment," said a senior analyst in a multinational securities firm. "High TRP ultimately converts into revenues for channels. Zee doesn't have any good shows, not a single blockbuster and more than that for their prime time (9:30pm) slot what they are showing are reruns of earlier shows which is bound to affect advertising revenues."

In the coming months there seems to be no special programming in the pipeline which could draw viewers back to the channel. The onslaught on Zee TV's revenue, the bread and butter for the network, by Star and Sony has had a negative impact on the scrip said an analyst with another foreign securities consultant based in Mumbai. "Further highlighting this is the debacle that was Sawaal Das Crore Ka which showed programming incompetence. The third quarter results will show how much the channel has spent on that front which will further hit the share price," he said.

"Repeated announcements of plans which were finally not implemented has affected Zee's credibility and also raised questions about the cash flow situation of the company. This was apparent in its failed FM bid, the cancellation of the Zee Sports channel and Siti Cable's failure to go through with its Net on cable plans," opined an analyst attached to a leading merchant banker. 

Predictions for the company's third quarter results, which will be out in a few days, are negative and they will take a further toll of the share price. Some discounting for the weak results is already taking place. Analysts believe that the price will remain weak for at least the coming two months as nothing positive is in the pipeline.

"The company should really put its act together and has to come out with concrete solutions. Only then can it arrest the downward slide as competition in the television industry is really heating up and better and better options are available for viewers as well as advertisers," said one analyst. "We really can't predict where the price will reach, but definitely the movement will be in negative territory."

The first analyst we spoke to believes that the price may touch Rs 200 in the coming month or two depending on the company's results. As ZTL Chairman Subhash Chandra is taking a serious review of his programming as well as overall business the recommendation is to wait and watch. 

At the Rs 200 level it is a good buy for the medium term. At the present level of Rs 225 the P/E is around 35 which most analysts are comfortable with but it is the future earning expectation that is affecting the price. The volumes on the BSE as well as the NSE are high enough given the high liquidity of the scrip even though it is much lower compared to its earlier trading volume.

The AT Kerney recommendations on restructuring are apparently being implemented by Zee but to what extent and whether it will actually improve the functioning of the company is the Sawaal Dus Crore Ka (100 million rupee question).

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