Saturday, June 10, 2017

UFO Moviez - Value buy?

UFO Moviez is India's largest digital cinema distribution network distributing movies through satellites and is also an in-cinema advertising platform.

The average ROCE of the company over the last 3 years is around 15% while RoE is 13%. As per the latest financial results here, the net current assets of the company stood at INR 125 Crore at the end of FY17. The company has fixed assets of INR 258 Crore and there is a goodwill on consolidation of INR 183 Crore. The company has large depreciation resulting in very high cash flow averaging INR 120 Crore per year in the last three years.

The company's latest presentation gives idea about the business model of the company. The company earns income from two main sources, telecast of movies through satellites and displaying ads during the intermission and at the start of movies in theatres. The company now distributes movies to more than 5000 digital screens in India and totally 6000+ screens in the world. The company's in-cinema advertising is being used in more than 3700+ screens. The average income from ad has increased from INR 1464 per second per screen in 2013 to 1732 per second per screen in 2017 and the average ad time has gone up from 2:46 minutes to 4:34 minutes. The company recently signed a contract to show ads on 300 screens of United Media Works. Recent Demonetisation took a big toll on the growth of the company and GST also might be a dampener for people to go for movies as taxes are going to increase.

The promoters hold around 28% shares and holding has decreased by a small percentage lately. The promoters seem shareholder friendly as dividend payout is around 45% for recent year (INR 10 for EPS of INR 22).

At the current market price of INR 380, the market cap of the company is around INR 1050 Crore which is less than 9 times its operating cash flow of last three years. The company's IPO came out in 2015 at INR 625 but all the money went to existing investors at that time. The business is very new but over time as number of multiplexes grow and they upgrade their technologies, chances are that this business will grow. So the stock is not a value buy but more a future play.
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Govi said...

Hi Chinmay,

It is a surprise to me that you have changed your style from value to growth. I have not seen you analyzing future growth as you are one of the true value investors around in India. any reasons for change in your strategy?

Chinmay said...

Hi Govi, I have not changed my style. What I found was that all the old stocks are trading very high right now so I am checking all the newly listed companies trading at low P/E, P/B, good yield etc... and trying to see if I can get some at below IPO issue price. Apart from UFO Moviez, I am also looking at

Precision Camshafts
Power Mech Projects
Monte Carlo Fashions
Just Dial

Sujay said...

Hi Chinmay, I just started following your blog. What's your view on OIL India, NMDC .

Chinmay said...

Hi Sujay,

OIL India is cheap but there are some near term concerns due to GST. NMDC is also cheap but Iron ore prices are very low and going down which may not help much. So near term upside for both are limited.

Unknown said...

hi chinmay ,
can u pls tell us more on IST LTD investment?every time u invest in new company we looks for ur thought process :)

Chinmay said...

One more I am looking at is GNA Axles.

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