Scrip:Midvalley Entertainment ltd
Price band:64-70
Fair price:30rs
Story:- Midvalley Entertainment Ltd. (MVEL) is engaged in the media and entertainment business like film production, distribution and exhibition in South India. MVEL present across the value chain of media and entertainment which includes concept to completion i.e. from script to screen. It produces, distributes and exhibits movies both in Indian and foreign languages.The company is coming out with an initial public offering (IPO) amounting to Rs 60 crore at a price band of Rs 64 – Rs 70 per share of face value Rs 10 each. The money raised through issue will be used for entering into screening agreements with 300 cinema theatres amounting to Rs 15 crore, renovation and upgrading of cinema infrastructure with digital equipment and other related assets for select 100 screens amounting to Rs 25.95 crore, acquisition of company, acquisition of screen rights of a company in similar line, range and objects of business amounting to Rs 12 crore; and rest for general corporate purpose and IPO expenses.The company's business is seasonal and the results of operations fluctuate from quarter-to-quarter.The exhibition industry is highly competitive. Also the Indian film exhibition sector is highly regulated by both the central and the state governments.The company had screening agreements with 85 theaters in 2008 that reduced to 46 in 2010 due to reduced footfalls and subsequently fall in collections. Negative cash flows from the operations in FY07, FY09, quarter ending July10 along with events of loan payment default, income tax dues visualize the weak fundamentals of the company.At the lower price band of Rs 64 per equity share of Rs 10 face value, the P/E works out to 39 times the annualized EPS of Rs 1.6 (on post-IPO equity) for the quarter ending July 2010 (its year-end is April). At the upper band of Rs 70, P/E works out to 41.8 times the annualized EPS of Rs 1.7 (on post-IPO equity) for the quarter ending July 2010. Asking price is highly unrealistic for such a small player with a pathetic financial and governance record.Just forget about it.
Sunday, January 9, 2011
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