BLBG:Goldman Sparks CTC Jump as Shows to Lift Sales: Russia Overnight
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 $8.7 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.”
Increased Volume
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. Trading volume in CTC Media’s stock almost quadrupled compared with 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, increased 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 growth in revenue in 2013, after an estimated 2.8 percent increase in 2012, according to the mean estimate of 12 analysts surveyed by Bloomberg. The company’s 2013 revenue will rise to $872.7 million, according to the survey.
Russian television advertising will probably increase 10 percent to 15 percent in 2013 from 2012, fueled by expanding gross domestic product, UralSib’s Chernyshev said.
Ad Spending
Russia’s GDP will expand 3.4 percent in 2013, according to the median estimate of 25 economists in a Bloomberg survey last month. Economic growth has probably advanced 3.5 percent in 2012, the government forecast last year, slowing from a 4.3 percent expansion in 2011.
Total spending on Russian TV ads is expected to increase to $5.9 billion in 2014, the biggest total in Europe, from $4.4 billion in 2011, CTC Media said on its website, citing estimates by industry think-tanks, including Zenith Optimedia and Video International.
CTC Media, which operates television channels in Russia, Kazakhstan, Moldova and broadcasts its programs in countries including Germany, U.S., Thailand and Israel, is switching its focus on 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, compared with a previous target of six to 54-year- olds, Podolsky told analysts in a conference call on Aug. 7.
Domestic Shows
Proceeds from advertising accounted for more than 97 percent of the company’s 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.
CTC Media, the largest non-government television broadcaster in Russia, said its audience of viewers aged six years old to 54 years old 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 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 on Jan. 10.
VimpelCom Gains
“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,” Balakhnin wrote. “The quality of programming has improved and the company is able to retain audience share through more cost- efficient means.”
American depositary receipts of VimpelCom Ltd. (VIP), Russia’s third-biggest cell 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 $10.6.
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. Brent oil for February settlement increased 1.1 percent to $111.88 a barrel on the London-based ICE Futures Europe exchange, while Urals crude, Russia’s chief export blend, rose 1.1 percent to $109.96.
The ruble added 0.2 percent to 30.2540 yesterday, the highest level since May 11. Ruble futures showed the currency strengthening 0.2 percent to 30.520 per dollar.
United Co. Rusal, the world’s largest aluminum producer, dropped 0.6 percent to HK$5.02 in Hong Kong at the city’s trading break. The MSCI Asia Pacific Index gained 0.1 percent.
To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net
To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net
