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Saturday 26 August 2006

Mid-Day Multimedia Ltd.

Company Details: Google Finance, Kotak Research
Company Website: http://middaymultimedia.com

This stock has been on our radar for some time now. The reasons are very simple. This company is in a business that has immense powers of retaining customer loyalty. After tobacco, media is probably the only business where once a cusomter is hooked, he is hooked for life (well, in most cases - some people do quit tobacco). Once some is used to reading a newspaper or listening to a particular radio channel, it is next to impossible that the reader/audeicnce would switch. Readers would not switch if tomorrow it starts publishing "facts" like UFOs and Men with 3 heads.

Mid-day was started as an Urdu newspaper and over the years they have expanded to have a radio channel (with seven more in pipeline), outdoor advertising business (which they have decided to shut down this quarter) and very recently they forayed into the movie business too.

Should we pick stake in Mid-Day?
This is one of those questions that torments every investor on every bid. And sadly there is no correct answer. It is next to impossible to buy at lowest levels and sell at the peaks. If you do it once, you are lucky, if you do it twice, its fate and if you do it more than that - better watch out for SEBI knocking on your doors.

Neutral - Things we should not look at before we buy

Investors like Jhunjhunwala (he is also on the board), BBC, Indian Express have had an interest in this company over the past few months and this goes without saying if they are investing in this company, there should be something good happening. Someone heard of something called Authority Misinfluence?

Negatives - Things that make Mid-Day unattractive
Over the past quarter they have not performed well as compared to previous quarters (this works in our favour - the stock prices would be down because of the negative sentiment and thus can be picked at cheap prices). Then there is too much competition in the market they operate in.

Positives - Things that make Mid-Day attractive
Mid-day has an excellent management (in my PERSONAL opinion) and they are doing right things at right time. They further have plans to increase the market share in the existing markets. They are looking at increasing the radio footprints to seven cities. They already have licenses for that.

Further in our opinion Mid-Day is trading at these levels because of the bad performance in the recent quarters.

Result - Buy/NoBuy
No Buy ! (We shall not talk about the reasons for not picking stake here)

P.S.: When we started tracking Mid Day, it was trading at 33 odd and yesterday it closed at 46.something. I am not even calculating the returns we would have made in the short term. Would like to quote WEB here ...
I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.

Comments? PseudoSocial@gmail.com

3 comments:

Ranjit Kumar said...

Hi,

I have read the analysis of midday on your blog pseudosocial. Here are my comments.

at 33rs Midday marketcap is around 150cr.
They have radio licenses for 7 cities which was worth 100cr.
And they had a paper business in Mumbai and Bangalore.
They have a very good content on the web for paper as well as radio(personal opinion).

I think considering the above points at 33 midday is at very fair if not cheap valuation.

Growth scenario: The paper business in mumbai stood the test of an onslaught from HT and TOI. This shows the management commitment. The paper is a tabloid and fits well with our traffic jams in ever growing major cities like bangalore & mumbai where the papers are distributed in traffic jams. You can say that radio grabs a major chunk of traffic jam market. But as newspaper stood the onslaught of TV radio is not going to affect paper business that much.

And regarding radio business it might have been good for them if they had stayed with niche english music than to the masala hindi and with this radio market getting crowdy they might have gotten a niche market.( This is a personal opinion ).

I have bought midday at 44 and 34.5 averaged to 41. My views may be biased. But i think i made sense. what do you say.

Bye
Ranjit Kumar

People at PseudoSocial said...

Hi Ranjit,

Thanks a lot for writing in. Talking about MidDay, when we posted about it, it was at 30 odd. As on yesterday it was comfortably trading above 50. Good ROI. But that is not the point.

The point is that we have to be able to identify the companies at the write time.

Please note that I do not have any position in Midday. I wanted to buy but since that was the first time I was analysing stocks, out of fear I did not.

I will tell you what I thought before we talked about Midday.

1. I have never been in mumbai. but I have friends in mumbai and I asked each and everyone of them what did they think about midday. I made 5 calls and all of them told me that mumbai mid-day rocks. Every guy in the mumbai local can be seen with a mid-day. This primarily told me that mid-day is one of the businesses that enjoys brand loyalties. the next question was the continuation of this loyalty and valuation at current levels.

2. Then I looked at growth prospects. I knew that they were looking at their radio business. I then asked my friends about their channel and as expected they said everyone likes it. I dont know if they were a english language player - a problem in my research. But I think i got this impression from my friends that they all listen to the channel.

3. Valuation - I left that to Sandeep (I am not a numbers guy - I am more of gut feel guy). Valutaions showed that they are a good company and results are bad because thy hived off their advertisement business and thus had to book some losses that offset their PAT. Valuations were also ok.

4. Finally I had a gut feel that its a good buy but we dint buy it. Good to listen to your gut feels but business does not run on gut feels.

5. Tell me what do you think about it and please point out the errors that I have made.

Can I post your comments abour Midday on the blog?

Regards,
PseudoSocial

P.S: If you want some good news about it, Rakesh Jhunjhunwala has stake in Midday and there is an old saying - follow smart money ;)

QUALITY STOCKS UNDER 5 DOLLARS said...

Great stuff