Deccan Chronicle Holdings Ltd.

DCHL CMP 123-124,

Deccan Chronicle Holdings owns 

1. Deccan Chronicle newspaper  -- It is one of the largest selling English daily newspapers in South India. Main income of the newspaper is from advertisements.  Between FY 03 to FY 08 the ad revenues have grown at a CAGR of 87%.  Going forward, the ad revenues are expected to grow by around 12-15% because earlier growth rates were due to launch of new editions in different cities.

2. Deccan Chargers which owns the IPL franchisee. 

3. Odyssey retail chain which is into selling of books and now venturing into eyewear segment. 

4. Sieger solutions which used to handle the company's internet ventures but which ran into troubled waters and has been currently shelved.

Now coming to total market cap of DCHL, at current market price of around 124, the total market cap is close to 3100 crores. 

DCHL enjoys the highest margins amongst peers in its newspaper business. For fy 10 full year, the sales was at around 890 crores and net profits was around 261 crores. EPS for FY 10 was around 10.7.   

For Q1 FY 11, the company posted sales of 231 crores and net profits of 91 crores which is a significant improvement over Q1 FY 10 -- sales at 217 cr and net profit at 77 cr.

VALUATION EXERCISE

DCHL has cash around 591 crores and debt of around 341 cr.

IPL franchisee valuation is a very subjective exercise. Kochi franchisee paid around 1700 crores recently. If one were to consider around 1000 crores for the IPL valuation, then effective market cap comes to (3100-1000) 2100 crores. This includes the newspaper business and the odyssey retail chain which has around 84 stores now and is profitable at the net level since last quarter. 

So effectively the newspaper business is available at around 2100 crores which generates net profits of around 260 crores (for fy 11 expected to be around 320 crores)

The newspaper business is fairly predictable and with improving economy, likely to do much better going forward. 

Hence effectively there seems to be some value in investing in DCHL at current price and this could be a good portfolio bet over the longer term.  Value unlocking from IPL venture and/or Odyssey retail could give further upsides.

Disc: I am invested in DCHL.