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Initial coverage Central European Media Enterprises
CFA Investment Research Challenge
February 15, 2010
Prague
NASDAQ: CETVAs of December 20, 2009
2
CME Valuation Model Structure
2
Macro• Ad Market potential, Exchange rates• Stock market premium, Risk-free interest rate
Ad market
• TV Ad market share• Power ratios, Audience + Market shares, Margins
CME• Costs structure, Balance sheet structure• Beta, Financial + Operational leverage
Valuation• Sales, Costs, FCFs• Discount factors
RISKS !!!• Model adjustment,
Sensitivity analysis• Consideration of
potential risk factors
$29.47• Our target/fair stock price• Recommendation BUY• Upside potential
IMF Database,Reuters, Capital IQ,CME documents,Damodaran
Information Sources
3
Macroeconomic Analysis
• benchmark of developed core EU countries (Austria, Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Sweden, Switzerland, UK)
Convergence target
• PIGS countries (Portugal, Ireland, Greece, Spain)• Spain especially relevant because of the regime shift in 80sHistorical experience
• CME markets (Czech Rep., Slovak Rep., Slovenia, Croatia, Bulgaria, Ukraine)Current potential
• Prices, volume and quality of goods, exchange rates, labour productivity, interest ratesLong-term in GDP
• Ad prices, Ad volume, structure of advertised productsShort-term in Ad Intensity
Two ways of convergence Channels of convergence
Our model
Convergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
4
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (1983)
Core EU (1983)
5
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (1984)
Core EU (1984)
6
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (1985)
Core EU (1985)
7
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (1986)
Core EU (1986)
8
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (1987)
Core EU (1987)
9
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (1988)
Core EU (1988)
10
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (1989)
Core EU (1989)
11
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (1990)
Core EU (1990)
12
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (1991)
Core EU (1991)
13
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (1992)
Core EU (1992)
14
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (1993)
Core EU (1993)
15
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (1994)
Core EU (1994)
16
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (1995)
Core EU (1995)
17
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (1996)
Core EU (1996)
18
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (1997)
Core EU (1997)
19
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (1998)
Core EU (1998)
20
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (1999)
Core EU (1999)
21
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (2000)
Core EU (2000)
22
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (2001)
Core EU (2001)
23
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (2002)
Core EU (2002)
24
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of PIGS to Core EU Countries
PIGS (1983)
Core EU (1983)
PIGS (2003)
Core EU (2003)
25
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of CEE and PGS to Core EU Countries
CEE (2003)
PGS (2003)
Core EU (2003)
PIGS (2003)
Core EU (2003)
CEE (2003)
26
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of CEE and PGS to Core EU Countries
CEE (2003)
PGS (2003)
Core EU (2003)
PIGS (2004)
Core EU (2004)
CEE (2004)
27
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of CEE and PGS to Core EU Countries
CEE (2003)
PGS (2003)
Core EU (2003)
PIGS (2005)
Core EU (2005)
CEE (2005)
28
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of CEE and PGS to Core EU Countries
CEE (2003)
PGS (2003)
Core EU (2003)
PIGS (2006)
Core EU (2006)
CEE (2006)
29
Macroeconomic Analysis
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of CEE and PGS to Core EU Countries
CEE (2003)
PGS (2003)
Core EU (2003)
PIGS (2007)
Core EU (2007)
CEE (2007)
30
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of CEE and PGS to Core EU Countries
CEE (2003)
PGS (2003)
Core EU (2003)
PIGS (2008)
Core EU (2008)
CEE (2008)
31
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of CEE and PGS to Core EU Countries
CEE (2003)
PGS (2003)
Core EU (2003)
PIGS (2008)
Core EU (2008)
CEE (2009E)
32
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of CEE and PGS to Core EU Countries
CEE (2003)
PGS (2003)
Core EU (2003)
PIGS (2008)
Core EU (2008)
CEE (2010E)
33
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of CEE and PGS to Core EU Countries
CEE (2003)
PGS (2003)
Core EU (2003)
PIGS (2008)
Core EU (2008)
CEE (2011E)
34
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of CEE and PGS to Core EU Countries
CEE (2003)
PGS (2003)
Core EU (2003)
PIGS (2008)
Core EU (2008)
CEE (2012E)
35
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of CEE and PGS to Core EU Countries
CEE (2003)
PGS (2003)
Core EU (2003)
PIGS (2008)
Core EU (2008)
CEE (2013E)
36
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of CEE and PGS to Core EU Countries
CEE (2003)
PGS (2003)
Core EU (2003)
PIGS (2008)
Core EU (2008)
CEE (2014E)
37Risks
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
Industry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of CEE and PGS to Core EU Countries
CEE (2003)
PGS (2003)
Core EU (2003)
PIGS (2008)
Core EU (2008)
CEE (2015E)
38
Source: IMF Database, Our estimates.
Macroeconomic AnalysisConvergence of CEE Markets
RisksIndustry overview Business model Financial analysis ValuationConvergence
0,00
0,25
0,50
0,75
1,00
1,25
1,50
0,00 0,25 0,50 0,75 1,00 1,25
Ad
Mar
ket
Inde
x (C
onve
rgen
ce in
Ad
inte
nsit
y)
GDP Index (Convergence in GDP)
Convergence of CEE and PGS to Core EU Countries
CEE (2003)
PGS (2003)
Core EU (2003)
PIGS (2008)
Core EU (2008)
CEE (2016E)
39
TV media industryTrends and impact of economic downturn
Economic downturn
• TV ad as a strongly pro-cyclical industry• Decrease in TV ad demand• Profitability deterioration
Industry trends
• Alternative devices• Non-linear broadcastingTechnology
Audience
Content
Advertisers
• Control over content• Segmentation
• Customer loyalty• Additional revenue pipeline
• Narrow target audience• Reasonable price
RisksIndustry overview Business model Financial analysis ValuationConvergence
40
Business Model
Geographical Presence
Multichannel strategy in a region with growth potential
TV Broadcasting
Internet
Content
Revenue Streams
• 95%+ on total• Multichannel strategy• Convergence of the region
• Acquisitions• User generated content• Portals
• Media Pro• Own production• Cost reductions
CZ (2009)EBITDA: 134m
SLO (2009)EBITDA: 17.6m
HR (2009)EBITDA: 1.5m
BG (2009)EBITDA: -41m
RO (2009)EBITDA: 54m
SVK (2009)EBITDA: 17.4m
UKR (2009)EBITDA: -54m
Revenues: > 100mRevenues: < 100mProblems
CME market share
RisksIndustry overview Business model Financial analysis ValuationConvergence
41
Strategic outlook of CMELong-term position looks tentatively positive
Market size
Market share
Convergence in GDP and Ad intensity
Decrease of importance of TV
Boom in new media ?Decrease of power ratios
Multi-channeling
Local Content
Cross Selling
Internet ?
ImpactFactorDimension
RisksIndustry overview Business model Financial analysis ValuationConvergence
42
Financial AnalysisLow margin and high indebtedness
0%
5%
10%
15%
20%
25%
30%
35%
40%
0.0 $200.0 $400.0 $600.0 $800.0 $
1,000.0 $1,200.0 $1,400.0 $1,600.0 $1,800.0 $2,000.0 $
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Revenues (mil. USD) EBITDA margin (%) $0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2009 2010 2011 2012 2013 2014 2015 2016
Senior Convertible Notes (3.50%; USD)
2007 Floating Notes (5.65%; EUR)
2009 Fixed Notes (11.625%;EUR)
2012 refinancing Senior Convertible Notes (9.00%)
2013 refinancing Floating Notes 2007 (8.00%)
2016 refinancing Fixed Notes 2009 (7.00%)
New Debt (7.00%)
Total Debt/EBITDA 2009 2010 2011 2012 2013 2014 2015 2016
14.7x 7.9x 5.2x 4.2x 3.6x 3.1x 3.0x 3.0x
Peer Group’s
Revenues and EBITDA margin Debt Structure
RisksIndustry overview Business model Financial analysis ValuationConvergence
Peer Group: CTC Media, MTG , RTL Group, TVN S.A:, Media Capital S.G.P.S., Mediaset SpA
Source of data: Capital IQ
43
Upside potential24.1%
DCF Model•3 phase model
1.phaseAd market and GDP
convergence 21.6%-11.1%
2.phase GDP convergence 8.0-5.0%
3.phase Stabilized markets 4.00%
WACCCost of Equity (CAPM)
Source Initial value GraduallyRisk free rate 30-year UST 4.38% constantUnlevered Beta See back-up 2.00 decreasingMarket Premium Damodaran 4.50% constantCountry Risk Damodaran 2.92% decreasingWACC 16.66% decreasingCost of Debt Interest Paid/Total DebtCapital Structure Iterated from the modelTax Rate 20.0% constant
The value of CME is given by its future cash flows…
$41.45$38.61
$26.50
$18.66
$21.44
$4.67
-$10.50
$3.72
-$20
-$10
$0
$10
$20
$30
$40
$50
Target Price $29.47
MarketPrice $23.75
Share price (in USD per diluted share)as of 20/12/2009
Valuation summary
•Media Pro synergies valued separately
Source: Capital IQ, Damodaran, Bloomberg, own estimates, Thomson One
RisksIndustry overview Business model Financial analysis ValuationConvergence
growth
44
Investment risksThe most sensitive assumptions of the valuation
• Deterioration of revenuesProlonged economic recession
Financial distress
FX risk
Execution risks
• High financial leverage
• Revenues in CEE currencies• Debts in EUR and USD
• Ukraine and Bulgaria• Media PRO
Risk Description Weight
Alternative broadcasters • Acceleration of the trend• Slow adaptation
!!!!!
!!!!
!!!
!!
!RisksIndustry overview Business model Financial analysis ValuationConvergence
45
recommendation on CME stock:
BUYTARGET PRICE: $29.47
Back up
47
CME WACC Analysis
Company Comp SetCompany Name 5 Year Beta LTM Total Debt/CapitalCTC Media, Inc 2.5 8.2%Media Capital S.G.P.S. 0.7 53.3%Mediaset SpA 0.9 40.8%Modern Times Group Mtg AB 2.1 35.0%RTL Group 0.6 3.1%TVN S.A. 0.9 61.5%
High 2.5 61.5%Low 0.6 3.1%Mean 1.3 33.6%Median 0.9 37.9%
CME Levered Beta Total Debt/CapitalCapital IQ 3.40 57.8% Money Central MSN 3.55Yahoo Finance 3.72Thomson One 3.55Google Finance 3.59
Mean 3.56Median 3.55
Unlevered BetaDamodaran (2007,entrtainment) 1.17Calculated (using median) 2.10
Initial Unlevered Beta for 2010 2.00
0.0
0.5
1.0
1.5
2.0
2.5
0%
5%
10%
15%
20%
25%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
WACC Cost of Debt
Cost of Equity Unlevered Beta
As of 12/20/2009
( )( )cUL tED ++= 1*/1*ββ( ) kCountryRisemiumMarketRCAPM Lf ++ Pr*: β
Formulas and Notes
)1(*)/(*)/(* cde tCDRCERWACC −+=
Comparable Beta Analysis Capital Asset Pricing Model, WACC
1.phase 2.phase 3.phase
Unlevered Beta 2.0 1.9-1.1 1.0
30-year UST 4.38% 4.38% 4.38%Market Premium 4.50% 4.50% 4.50%Country Risk 2.92% 2.82%-1.52% 1.42%Cost of Equity 23.27-17.99% 17.53-11.60% 11.14%
Cost of Debt 9.51%- 7.42% 7.84%-6.54% 6.44%Total Debt/Capital 56%-20% 20% 20%
Source: Capital IQ
Source: Company’s documents, own estimates, CapitalIQ
48
Valuation of MediaPro Synergies
n MediaPro revenues included in DCF Model
n Synergies valued separately
Synergies 2010 2011 2012 TVCost Savings $1.0 $2.0 $1.0Cost Savings after tax implications 0.8 1.7 0.8Revenues cross-selling CME&MediaPRo 1.2 2.0 1.7Additional Revenues Margin 35.0% 35.0% 35.0% 35.0%Tax Rate 20.0% 20.0% 20.0% 20.0%Grow th in TV 4.0%Cummulative total impact on Net Income $1.2 $3.4 $4.8 $26.7
Discount Factor 17.0% 17.0% 17.0% 17.0%Present Value of Synergies (12/20/09) $33.4
In USD Millions
Source: CME documents, own estimates
n Public Comparables Method: EBITDA 09LTM normalized (source: Capital IQ)
49
Foreign Exchange & Debt Structure
* Basket of CEE currencies (BGN, HRK, CZK, RON, HRN) against EUR.Source: own estimates, IMF, EIU
FX StructureAccounting unit Locals CZK USD EURRevenues 100%
Operating costs 100%Cost of programming 50% 50%General & Admin 100%Depreciation 100%Amortization 100%
Corporate operating costs 33% 33% 33%
Source: CME documents
LT Debt Structure and Maturity
$475.0
$219.6
$644.3
$0
$100
$200
$300
$400
$500
$600
$700
2012 2013 2016
$475m
€150m
€440m
in millions
LT Debt in USD Value Cry Maturity RateSenior Convertible Notes 475.0 475.0 USD Mar-15-2013 3.500% 2007 Floating Notes 219.6 150.0 EUR May-15-2014 6-month EURIBOR + 1.625%2009 Fixed Notes 644.3 440.0 EUR 2016 11.625%
(1) 2007 Floating Notes has covenant: :Coverage ratio(EBITDA/int.expenses)>2.0x
(2) CME’s LT Debt goal is 3xEBITDA(3) Source: CME documents, own estimates
Total Debt/ EBITDA 2009 2010 2011 2012 2013 2014 2015 2016
14.7x 7.9x 5.2x 4.2x 3.6x 3.1x 3.0x 3.0x
+ 1% 0% - 1% - 2% - 3%+ 3% $ 29.06 $ 29.63 $ 30.23 $ 30.87 $ 31.54 + 2% $ 28.71 $ 29.26 $ 29.85 $ 30.47 $ 31.13 + 1% $ 28.37 $ 28.90 $ 29.47 $ 30.07 $ 30.71 0% $ 28.03 $ 28.55 $ 29.10 $ 29.69 $ 30.31
- 1% $ 27.70 $ 28.20 $ 28.74 $ 29.31 $ 29.91
USD/EURCEE/EUR*
Analysis of Alternative FX Scenarios(prediction of FX relative changes for period of 2010-2016)
Interest Coverage (EBITDA/Interest Expense) 2009 2010 2011 2012 2013 2014 2015 2016
0.9x 1.7x 2.6x 3.2x 3.2x 3.4x 3.5x 4.2x
50
Capital Expenditures
$0
$50
$100
$150
$200
$250
2009 2010 2011 2012 2013 2014 2015 2016
D&A
CAPEX
In USD millions
Source: Company’s documents, own estimates
(1) Capital expenditures modeled as a percentage of revenues (based on history).(2) Depreciation as a percentage of PP&E (portion based on history). Amortization of programming as a percentage of
total programming (based on history).
51
Costs structure
0100200300400500600700800900
Operating costs Cost of programming
Station selling, general and admin. exp.
Operating costs
21%
Cost of program
ming63%
Station selling, general
and admin.
exp.16%
2009
Operating costs
64%
Cost of program
ming0%
Station selling, general
and admin.
exp.36%
2001Operating costs
21%
Cost of program
ming66%
Station selling, general
and admin.
exp.13%
2016
Source: Company’s documents, own estimates. CapitalIQ
52
CME Report (1) Market Profile
Current Price (12/20/09) $23.75 52-Week High (9/18/09) 38.61 52-Week Low (3/09/09) 4.67 Daily Volume 0.34Dividend Yield (estimated) N/ACurrent Price (12/20/09) 23.75 % of 52-Week High 61.5% % of 52-Week Low 508.6% % of 52-Week Range 56.2%
Total Basic Common Shares 63.5Market Capitalization 1,509.0
Float 38.0%Held by Insiders 16.4%Held by Institutions 42.1%
Book Value per Share 49.8Debt to Total Capital 57.8%Return on Equity -26.6%Source: Thomson One, Capital IQ
in $Mn, expect per share dataMarket profile
0
500
1000
1500
2000
2500
3000
0
20
40
60
80
100
120
Jan
-06
Mar
-06
May
-06
Jul-0
6
Sep
-06
Nov
-06
Jan
-07
Mar
-07
May
-07
Jul-0
7
Sep
-07
Nov
-07
Jan
-08
Mar
-08
May
-08
Jul-0
8
Sep
-08
Nov
-08
Jan
-09
Mar
-09
May
-09
Jul-0
9
Sep
-09
Nov
-09
Jan
-10
CETVNASDAQ
Beginning of liquidity crunch
Market Crash
RefinancingTime Warner investment announced
Acquisition of MediaPro announced
Deal with Kolomoisky
53
CME Report (2) Valuation
Valuation in $MnPV 1.phase $634.9PV 2.phase 1,144.1PV terminal value 1,168.4Enterprise Value $2,947.4PV of synergies 33.4Total Enterprise Value $2,980.7Net Debt 1,108.6Total Equity Value $1,872.1No. of diluted shares 63.5Value per diluted share $29.47No. of diluted shares from the latest fillings w ith SEC
1.phase 21%
2.phase39%
3.phase (TV)39%
synergies1%
Composition of total enterprise value
Assumptions1.phase
(2010-2016)2.phase
(2017-2030)3.phase
(Terminal value)rf 4.38% 4.38% 4.38%country risk 2.92% 2.82%-1.52% 1.42%unlevered β 2.0 1.9-1.1 1.0levered β 3.6-2.4 2.3-1.3 1.2market premium 4.50% 4.50% 4.50%Re (CAPM model) 23.27-17.99% 17.53-11.60% 11.14%Rd 9.51%- 7.42% 7.84%-6.54% 6.44%WACC 16.67%-15.77% 15.38%-10.38% 9.00%growth 8.00-5.00% 4.00%PV (in $Mn) $634.9 $1,144.1 $1,168.4Source: Thomson One, CME, CapitalIQ, Damodaran data, ow n estimates
Growth in TV/ Value Per Diluted Share∆ in WACC 3.0% 4.0% 5.0%
-2.00% $49.90 $61.34 $84.22-1.00% $35.70 $41.45 $51.03
-- $26.25 $29.47 $34.281.00% $19.51 $21.44 $24.142.00% $14.47 $15.68 $17.30
Growth in TV/ Implied EBITDA Multiple∆ in WACC 3.0% 4.0% 5.0%
-2.00% 46.0x 53.8x 69.5x-1.00% 36.3x 40.2x 46.8x
-- 29.9x 32.1x 35.4x1.00% 25.3x 26.6x 28.4x2.00% 21.8x 22.6x 23.7x
based on the expected 2009EBITDA
Growth in TV/ Implied EBITDA Multiple∆ in WACC 3.0% 4.0% 5.0%
-2.00% 24.3x 28.4x 36.7x-1.00% 19.2x 21.2x 24.7x
-- 15.8x 16.9x 18.6x1.00% 13.3x 14.0x 15.0x2.00% 11.5x 11.9x 12.5x
based on the expected 2010EBITDA
54
CME Report (3) Business by Business
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
EBITDA margin ($mil.)
Revenues
EBITDA margin
Source: CME Documents, Our estimates.
55
CME Report (4) Others
59%24%
10%
7%
Equity structure - value
Class A Public Float
Class A Time Warner
Class B Launder Family
Class B Time Warner
26%
10%
44%
20%
Equity structure - voting rights
Class A Public Float
Class A Time Warner
Class B Launder Family
Class B Time Warner
Source: Company’s documents, own estimates. CapitalIQ
56
CME Report – Income Statement
Income Statement
For the Fiscal Period Ending Dec-31-2007
Dec-31-2008
Dec-31-2009
Dec-31-2010
Dec-31-2011
Dec-31-2012
Dec-31-2013
Dec-31-2014
Dec-31-2015
Dec-31-2016
Revenue $838.9 $1,019.9 $719.6 $826.4 $1,005.1 $1,186.9 $1,362.7 $1,534.2 $1,711.0 $1,901.2 grow th 39.2% 21.6% -29.5% 14.8% 21.6% 18.1% 14.8% 12.6% 11.5% 11.1%
Cost Of Revenue 501.7 670.5 565.3 612.8 676.7 776.2 882.7 986.6 1,093.7 1,207.7 Operating costs 116.9 145.2 121.0 124.0 145.7 170.3 193.5 215.6 237.8 261.4 Cost of programming 327.2 438.2 374.2 396.7 432.2 498.5 572.3 644.4 718.6 798.5 Depreciation & Amort. 32.7 51.7 51.1 58.0 63.0 70.0 78.6 88.3 99.0 110.7 Amortization of broadc. licenses and other intang. 25.0 35.4 19.0 34.1 35.8 37.4 38.3 38.4 38.2 37.1 Gross Profit 337.1 349.5 154.3 213.6 328.4 410.7 480.0 547.6 617.4 693.5
Station selling, general and administrative expenses 71.3 90.8 95.1 95.0 109.8 123.2 134.4 143.7 152.3 160.7Corporate operating costs 55.4 49.7 36.3 34.5 50.3 59.3 68.1 76.7 85.6 95.1 Other Operating Exp., Total 126.7 140.5 131.4 129.5 160.1 182.5 202.5 220.4 237.8 255.8 Operating Income (EBIT) 210.5 209.0 22.9 84.1 168.3 228.2 277.5 327.2 379.6 437.8
Interest Expense -54.9 -68.5 -100.0 -100.0 -101.9 -103.9 -124.6 -133.3 -145.7 -139.5Interest and Invest. Income 5.7 10.0 5.8 8.9 8.8 10.2 13.3 17.8 22.5 27.6 Net Interest Exp. -49.2 -58.5 -94.2 -91.1 -93.1 -93.7 -111.3 -115.5 -123.2 -111.9
Currency Exchange Gains (Loss) -38.1 -31.5 120.0 7.2 31.1 73.9 116.5 159.9 206.2 264.5Other Non-Operating Inc. (Exp.) 7.9 2.6 EBT Excl. Unusual Items 131.0 121.6 48.7 0.2 106.3 208.4 282.6 371.6 462.6 590.4
Unusual Items Total -19.4 -336.8 -90.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 EBT Incl. Unusual Items 111.6 -215.2 -41.7 0.2 106.3 208.4 282.6 371.6 462.6 590.4
Income Tax Expense 20.8 34.5 0.0 0.0 21.3 41.7 56.5 74.3 92.5 118.1Minority Int. in Earnings -17.2 -2.1 -9.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Earnings from Cont. Ops. 73.7 -251.8 -51.5 0.1 85.0 166.7 226.1 297.3 370.1 472.3
Earnings of Discontinued Ops. -4.5 -3.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Extraord. Item & Account. Change 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net Income $69.2 -$255.6 -$51.5 $0.1 $85.0 $166.7 $226.1 $297.3 $370.1 $472.3
Source: Company’s documents, own estimates. CapitalIQ
57
CME Report – Balance Sheet
Balance Sheet
as of Dec-31-2007
Dec-31-2008
Dec-31-2009
Dec-31-2010
De c-31-2011
Dec-31-2012
Dec-31-2013
Dec-31-2014
Dec-31-2015
Dec-31-2016
ASSETSCash And Equivalents $142.8 $107.4 $466.9 $424.5 $453.0 $569.2 $758.1 $1,021.8 $1,228.7 $1,527.1Restricted Cash 1.3 0.8
Total cash 144.1 108.3 466.9 424.5 453.0 569.2 758.1 1,021.8 1,228.7 1,527.1
Accounts Receivable 224.7 221.5Other Receivables 5.1 4.7Notes Receivable 1.9 0.0 Total Receivable s 231.8 226.1 262.2 289.8 338.7 383.7 421.9 453.9 482.8 510.5
Productions in progress (other) 5.7 14.1 18.0 21.6 25.9 31.1 37.3 44.8 53.7 64.5Prepaid Exp. (paid programming & other prepaid expenses) 62.6 61.6 65.9 66.6 67.2 67.9 68.6 69.3 70.0 70.7Deferred Tax Assets, Curr. (other) 3.7 5.9 12.2 12.2 12.2 12.2 12.2 12.2 12.2 12.2Other Current Assets 87.3 79.5 138.0 147.2 165.2 178.9 186.7 189.1 187.5 182.3 Total Current Ass ets 535.1 495.4 963.2 961.9 1,062.3 1,243.0 1,484.8 1,791.2 2,035.0 2,367.3
Gross Property, Plant & Equipment 316.1 359.5 451.5 509.4 589.8 684.7 793.8 916.5 1,053.4 1,205.5Accumulated Depreciation -140.8 -152.8 -245.6 -303.6 -366.6 -436.6 -515.1 -603.4 -702.4 -813.1 Net Prope rty, Plant & Equipm ent 175.3 206.7 206.0 205.8 223.2 248.2 278.6 313.0 350.9 392.4
Long-term Investments 16.6 16.6 16.6 112.0 112.0 112.0 112.0 112.0 112.0 112.0Goodw ill 1,114.3 1,041.0 1,158.3 1,158.3 1,158.3 1,158.3 1,158.3 1,158.3 1,158.3 1,158.3Program rights (net), broadcast licenses and other intg.assets 481.8 628.3 543.7 559.1 572.8 575.0 562.1 545.4 509.9 468.4Other: Loans Receivable (related to 3rd parties) 0.0 0.0 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2Other: Deferred Tax, LT 2.1 2.1 13.2 13.2 13.2 13.2 13.2 13.2 13.2 13.2Other: Deferred Charges, LT (capitalized debt costs) 10.3 14.8 21.8 21.8 21.8 21.8 21.8 21.8 21.8 21.8Other: (production in progress, other) 2.9 3.9 7.6 7.6 7.6 7.6 7.6 7.6 7.6 7.6Total Ass ets $2,338.4 $2,408.7 $2,935.5 $3,044.8 $3,176.4 $3,384.2 $3,643.5 $3,967.7 $4,213.8 $4,546.1
LIABILITIESAccrued current liabilities and others $181.5 $156.4 $258.3 $275.8 $312.0 $342.7 $365.8 $383.1 $397.3 $410.6Accounts Payable 37.9 35.8 43.4 49.6 60.0 70.5 80.5 90.2 100.1 110.6Credit facilities and obligations under capital leases 15.1 36.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Senior Notes being redeemed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Current Liabilities 234.5 228.7 301.6 325.4 372.0 413.1 446.3 473.2 497.4 521.2
Long-Term Debt 585.6 1,063.5 1,365.5 1,401.1 1,401.1 1,401.1 1,401.1 1,401.1 1,550.3 1,756.5Def . Tax Liability, Non-Curr. 73.3 89.1 77.3 77.3 77.3 77.3 77.3 77.3 77.3 77.3Other Non-Current Liabilities 22.0 23.1 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5Total Liabilities 915.5 1,404.4 1,758.0 1,817.4 1,863.9 1,905.1 1,938.3 1,965.2 2,138.6 2,368.6
Common Stock 3.4 3.4Additional Paid In Capital 1,051.3 1,018.5Retained Earnings 53.6 -224.1Comprehensive Inc. and Other 291.5 203.3
The beginning balance 1,001.2 1,184.1 1,234.0 1,319.0 1,485.7 1,711.8 2,009.0 2,081.8Additional Paid In Capital in the year / (dividends) 234.4 49.8 0.0 0.0 0.0 0.0 -297.3 -370.1Net income -51.5 0.1 85.0 166.7 226.1 297.3 370.1 472.3
Total Com m on Equity 1,399.8 1,001.2 1,184.1 1,234.0 1,319.0 1,485.7 1,711.8 2,009.0 2,081.8 2,184.1
Minority Interest 23.2 3.2 -6.6 -6.6 -6.6 -6.6 -6.6 -6.6 -6.6 -6.6 Total Equity 1,423.0 1,004.4 1,177.5 1,227.4 1,312.4 1,479.1 1,705.2 2,002.4 2,075.2 2,177.5
Total Liabilities And Equity $2,338.4 $2,408.7 $2,935.5 $3,044.8 $3,176.4 $3,384.2 $3,643.5 $3,967.7 $4,213.8 $4,546.1 Source: Company’s documents, own estimates. CapitalIQ
58
CME Report – Cash Flow
Projected Cash FlowDec-31-
2009Dec-31-
2010Dec-31-
2011Dec-31-
2012Dec-31-
2013Dec-31-
2014Dec-31-
2015Dec-31-
2016Operating ActivitiesNet Income -$51.5 $0.1 $85.0 $166.7 $226.1 $297.3 $370.1 $472.3Depreciation 51.1 58.0 63.0 70.0 78.6 88.3 99.0 110.7Amortization 19.0 34.1 35.8 37.4 38.3 38.4 38.2 37.1Programming balance -10.1 0.0 10.8 12.0 26.3 29.0 46.4 50.3Minority interest expense / (income) -9.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0(Increase)/decrease in working capital 0.2 -17.3 -25.4 -23.4 -19.6 -15.8 -12.8 -10.0(Increase)/decrease in other long-term assets -144.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0Increase/(decrease) in other long-term liabilities -21.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Cash Flow from Operating Activities: -166.7 75.1 169.2 262.7 349.7 437.1 540.8 660.3
Investing ActivitiesCapital expenditures -50.4 -57.8 -80.4 -95.0 -109.0 -122.7 -136.9 -152.1Additions to intangibles 75.7 -49.6 -60.3 -51.6 -51.8 -50.6 -49.1 -45.9Long Term Investments 0.0 -95.4 0.0 0.0 0.0 0.0 0.0 0.0
Cash Flow from Investing Activities: 25.3 -202.8 -140.7 -146.5 -160.8 -173.3 -186.0 -198.0
CASH FLOW AVAILABLE FOR FIN. ACT. -$141.4 -$127.8 $28.5 $116.2 $188.9 $263.8 $354.9 $462.3
Financing ActivitiesIssuance / (repayment) of revolver -36.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0Issuance of long-term debt 302.1 35.6 0.0 0.0 475.0 219.6 149.2 850.5(Repayment) of long-term debt 0.0 0.0 0.0 0.0 -475.0 -219.6 0.0 -644.3Additional paid in capital/ (dividends) 234.4 49.8 0.0 0.0 0.0 0.0 -297.3 -370.1
Cash Flow from Financing Activities: 500.0 85.4 0.0 0.0 0.0 0.0 -148.1 -163.9
Net Change in Cash 358.6 -42.4 28.5 116.2 188.9 263.8 206.8 298.5Beginning cash balance 108.3 466.9 424.5 453.0 569.2 758.1 1,021.8 1,228.7Ending cash balance $466.9 $424.5 $453.0 $569.2 $758.1 $1,021.8 $1,228.7 $1,527.1
as of
Source: CME Documents, Our estimates.
59
CME Report – Segment Sales and EBITDA
Segment Sales (in USD m) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Bulgaria n.a. 1.3 3.2 5.0 7.8 11.8 17.2 24.3 33.6 45.7 Croatia 37.2 54.7 46.8 52.5 63.8 75.7 87.8 100.2 113.2 126.9 Czech Republic 279.2 376.5 289.6 317.6 369.0 413.5 449.8 480.7 509.1 536.5 Romania 215.4 274.6 180.9 205.4 250.3 294.9 334.6 368.8 399.3 427.3 Slovakia 110.5 132.7 110.0 122.9 152.7 179.9 202.7 221.9 238.0 252.1 Slovenia 69.6 80.7 67.4 68.2 75.6 80.9 85.0 88.1 90.6 92.7 Ukraine 126.8 102.4 21.5 55.4 88.0 134.1 191.7 258.8 338.6 434.2
Segment EBITDA (in USD m) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Bulgaria n.a. -10.2 -41.0 -36.5 -32.4 -27.7 -20.0 -8.6 6.8 26.6 Croatia -13.9 5.4 1.5 5.3 12.0 16.9 21.9 27.8 34.3 41.4 Czech Republic 156.5 208.7 134.1 150.3 179.9 192.2 194.5 191.7 185.0 174.6 Romania 93.1 111.8 53.9 69.1 96.8 115.8 128.4 136.1 139.0 137.4 Slovakia 41.5 50.2 17.4 26.8 48.0 61.8 71.2 78.5 83.1 85.4 Slovenia 22.8 25.4 17.6 18.7 24.0 25.5 26.6 28.1 29.9 32.1 Ukraine 23.5 -33.8 -54.3 -31.1 -15.0 7.5 38.9 78.4 128.3 190.7
Source: CME Documents, Our estimates.
60
CME Report – GDP Convergence
Source: IMF. own estimates
History and IMF prediction
61
CME Report – Ad Intensity Convergence
Source: IMF ,own estimates
History and our prediction
62
CME Report - Market PositionsAudience Share * Power Ratio = Market Share
Source: CME Documents, own estimates
63
CME Report – Trading Multiples
Company Comp SetCompany Name TEV/Total
Revenues LTMTEV/EBITDA LTM TEV/EBIT LTM P/Diluted EPS
Before Extra P/TangBV LTM TEV/Forward
Total Revenue TEV/Forward EBITDA NTM
Forward P/E NTM
CTC Media, Inc (NasdaqGS:CTCM)
4.45x 9.59x 10.39x NM 17.11x 4.2x 10.5x 16.8x
Media Capital S.G.P.S. (ENXTLS:MCP)
1.90x 12.07x 17.55x - -
Mediaset SpA (CM:MS) 2.07x 13.04x 17.48x 21.84x NM 2.0x 7.9x 18.6xModern Times Group Mtg AB (OM:MTG B)
1.81x 11.14x 12.19x 16.46x NM 1.7x 12.5x 14.9x
RTL Group SA (BDL:006146252) 1.32x 8.70x 10.12x NM 4.62x 1.3x 8.3x 15.0xTVN S.A. (WSE:TVN) 3.02x 13.00x 19.16x 17.36x NM 2.6x 9.6x 17.4x
Central European Media Enterprises Ltd. (NasdaqGS:CETV)
3.55x 20.85x 69.65x NM NM 3.3x 20.0x NM
Summary Statistics TEV/Total Revenues LTM
TEV/EBITDA LTM TEV/EBIT LTM P/Diluted EPS Before Extra
P/TangBV LTM TEV/Forward Total Revenue
TEV/Forward EBITDA NTM
Forward P/E NTM
High 4.45x 13.04x 19.16x 21.84x 17.11x 4.2x 12.5x 18.6xLow 1.32x 8.70x 10.12x 16.46x 4.62x 1.3x 7.9x 14.9xMean 2.43x 11.26x 14.48x 18.55x 10.86x 2.4x 9.8x 16.5xMedian 1.98x 11.60x 14.84x 17.36x 10.86x 2.0x 9.6x 16.8x
Source: Capital IQ as of 12/20/2009
All values in millions, except per share data and ratios
64
UkrainePut option was exercised and $300mil. earned
• Partnership with Igor Kolomoisky
• Channels: Studio 1+1, Kino, TET TV
• Losing market position – investments made
• Political risk
Situation before
• Operations sold to Kolomoisky for $300m
• Market abandoned
Today
$29.14
- 1%
$29.47
Target price:
65
CME as of 2/11/2010
0
5
10
15
20
25
30
35
40
12.2
.200
9
26.2
.200
9
12.3
.200
9
26.3
.200
9
9.4.
2009
23.4
.200
9
7.5.
2009
21.5
.200
9
4.6.
2009
18.6
.200
9
2.7.
2009
16.7
.200
9
30.7
.200
9
13.8
.200
9
27.8
.200
9
10.9
.200
9
24.9
.200
9
8.10
.200
9
22.1
0.20
09
5.11
.200
9
19.1
1.20
09
3.12
.200
9
17.1
2.20
09
31.1
2.20
09
14.1
.201
0
28.1
.201
0
NasdaqGS:CETV - Share Pricing Price Target
PRICE TARGET:$29.14
UPSIDE:+6,6%
In USD; as of 2/11/2010
Source: CapitalIQ, own estimates