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It pays to have eyeballs in the media business. And Hum TV has been gathering just that since the firm started out 11 years ago. The media giant continues to grow strength to strength each year, and the year to date has been no different. After posting 31 percent year-on-year growth in bottom line profits in the first half ending December 2014, the firm reported 31 percent growth yet again for the third quarter ending March 2015.
While Hums year-on-year top line growth slowed to 18 percent in 3QFY15 from a growth of 33 percent in the first half, its margins jumped phenomenally. The firm earned 56 rupees as gross profit per every 100 rupees of sales in 3QFY15 as against 46 rupees in the year-ago period. Consequently, 9MFY15 gross margins now stand at 50 percent compared to 46 percent in same period last year. This column anxiously awaits the release of Hums detailed accounts to be able to figure out the reasons behind such a huge jump in margins.
Hums distribution and administration expenses rose substantially higher to about 24.7 percent of sales in 9MFY15 as against 22.4 percent in year-ago period. That rise is most visible in the third quarter - rising 500 basis points plus on year-on-year basis. However, the firms other operating income, which plausibly rose on account of higher sales of magazines and DVDs, partially offset that impact.
The companys distribution and administration expenses can be expected to rise a bit more disproportionately in the years ahead, as the company plans to venture into new and exciting business areas. But that shouldn be a problem as long as increased efforts are helping the firm to gain footprint in other markets and businesses for long term top line growth.
Last fiscal year, Hum was launched in Middle East and North Africa (MENA) region and within a very short time it has established itself as one of the leading Pakistani/South Asian entertainment channels in that region. The company reports that some of Hums content is in fact being dubbed in Arabic and is being broadcasted by Middle East Broadcasting Center.
Aside from the plans to expand its MENA operations in the year ahead, Hum plans to develop a separate business unit to focus on the cinema industry, given that cinema industry is seen posting a double-digit growth in the foreseeable future. The firm has also started tapping the Indian market via content syndication arrangement with ZeeZindagi, with an aim to attract at least the 70 million Urdu speaking eyeballs in India in the first round. As a result of these efforts, the firm expects international revenue pie to increase to 15 percent of total from about 5 percent at present.
Late last year (mid-Nov), Hum had split its shares to increase liquidity and increase stock affordability for small investors. Consequently the stock fell from about Rs160-170 a share to about Rs14-18 per share since then. Daily trading volume in the firms stock has accordingly increased from an average 0.13 million between Jan-mid-November 2014 to an average 3.4 million in mid-November 2014 to-date. Assuming that Hum maintains its 9MFY15 performance into the last financial quarter, then it is currently trading at a price-to-earning ratio of about 17.2 times as against the current market P/E of 9-10 times. It pays to attract eyeballs, doesn it?


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Hum Network - Financial Highlights
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Rs (mn) 9MFY15 YoY 3MFY15 YoY
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Net revenue 2,659 28% 862 18%
Cost of production 1,258 22% 356 -4%
Transmission cost 63 -27% 22 2%
Gross profit 1,338 40% 484 43%
Distribution costs 358 44% 135 41%
Administrative expenses 301 38% 104 53%
Other operating income 94 22% 34 117%
Finance cost 15 114% 8 n.a
Profit after taxation 553 31% 186 31%
EPS (Rs)
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Source: KSE announcement

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