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To: Dale Baker who wrote (62731)	8/11/2008 8:26:36 AM
From: Robohogs	Respond to of 118717

I am doing one of my couple of shouldn't posts right now - from Realmoney: Grange Johnson CETV is Misunderstood and Undervalued 8/6/2008 3:48 PM EDT Steve Birenberg has talked about Central European Media (CETV) for a long time, most recently on Monday. We are also true believers in the company, its management and its prospects. The stock is down over 40% in local currency. It is currently being shorted by global macro and quant funds who look at its relatively high p/e and big market cap and think that this is way to play pan European slowdown. What they are missing on the revenue side is that these countries have relatively paltry GDPs per capita - though over time they will converge with Western Europe - driving up ad rates and that their advertisers are first tier (think Procter & Gamble (PG)). If you exclude still-maturing investments in The Ukraine and Bulgaria shares would trade for roughly 6.5x EBITDA. One longer term catalyst: Apax the European buyout shop, and Ronald Lauder control the company. It is possible that they sell the company in a few years as an exit. Their quarter was a thing of beauty. We have been adding here and now on weakness. Long cetv AND This Media Play Could Double By Steve Birenberg RealMoney Contributor 8/4/2008 7:32 AM EDT URL: thestreet.com Central European Media Enterprises (CETV) remains my favorite media stock for all time horizons. Despite my enthusiasm, the shares have performed poorly this year and are down 36% from the 52-week high. Many media stocks have fared poorly this year, but CETV's slump is unjustified: The company is beating estimates (and seeing upward earnings forecasts) while virtually ever other media company is fairing poorly relative to expectations. CETV's shares trade for 8 times 2008 estimated EBITDA. (Price-to-earnings ratios are less relevant, as the company's euro-denominated debt causes foreign exchange fluctuations to distort results.) CETV's valuations are similar to other TV-based media assets such as CBS (CBS) , Disney (DIS) , News Corporation (NWS.A) , and Viacom (VIA.B) . So if valuations are similar, why are shares cheap? This company has relatively robust growth and an almost perfect track record of beating estimates. Sales rose 41% and EBITDA surged 53% in the second quarter. Those growth rates have been in place for much of the last six quarters. Barring a major slowdown in Central and Eastern European economic activity -- and no signs of such a slump have appeared -- growth in 2009 should be at least 15% to 20% in local currencies. Sure, CETV's reported results have benefited from the weak dollar, but local currency growth has been in the range of 15% to 25% across the entire company for the past several years. CETV's growth is being fueled by the rapidly growing economies in the region, which is driving per-capita income and spending. That is leading advertisers to aggressively boost budgets. CETV's stations typically generate high ratings in their regions, and management is widely acknowledged to be best in the business. Besides growing interest from advertisers, CETV has aggressively raised ad prices to begin to close the monumental gap that exists between rates in Western Europe vs. those in Central and Eastern Europe. There are two bear arguments that have been circulating. First is the macro argument: Central and Eastern European economies will rapidly decelerate due to rising inflation and slowing global growth. If this happens, CETV's 2009 outlook is not nearly as good as I or the consensus believes. Revenue projections would prove to be too high, and best-in-class operating margins would come under pressure. I understand the argument, but as I mentioned, CEE economies are holding up just fine so far. Inflation pressures are a concern, but they also make the ad prices increases easier to implement. Further, the region is not dependent on high commodity prices like other emerging economies: Growth in the region is a function of low cost labor and manufacturing, leading to very rapid growth in foreign direct investment. The second bear argument revolves around valuation. Some sell-side analysts think the stock is trading at 10 times EBITDA. That figure includes a pair of markets that are operating and break-even, and thus should be measured on a private market value basis. Croatia just had its first-ever EBITDA-positive quarter, as rising rates led a large recent spike in revenues. EBITDA is on its way toward $30 million in 2010, by which time it will be reflected in firm-wide EBITDA calculations. In the meantime, I am extremely confident that if the Croatia business were sold today, the price would be at least $250 million. CETV has been in the Ukraine for many years, and revenues have risen steadily at about 30% annually since 2004, although EBITDA results have been uneven due in part to CETV's lack of control over day-to-day management of its station. At the end of June, the company increased its ownership to 90% and will move to 100% at the end of this year. The two-step buyout places a value of $800 million on the Ukraine property. Two recent events make this look conservative. First, CETV just issued detailed five-year guidance for Ukraine, projecting 2012 revenue and EBITDA of $500 million and $200 million, respectively. Second, Modern Times Group, one of CETV's primary competitors, purchased the No. 2 station in Bulgaria for almost $1 billion. Bulgaria's population is about 15% the size of Ukraine's. I believe that at least $1.2 billion in hidden value exists at CETV in its Croatian and Ukrainian operations. Back out $1.2 billion from the enterprise value, and the EBITDA multiple is 8 times. Given the growth profile and history of consistently meeting or beating expectations, the shares surely deserve a premium to other TV-based media assets. Even if you are worried about CEE economies, you have to admit that parity valuation with mature assets that are lucky to grow in the single digits discounts the risk. And if you are worried about emerging markets, you are probably paying up for defensive stocks like Procter & Gamble (PG) . One reason P&G is a defensive play is rapid growth in emerging markets. Now consider the fact that P&G is one CETV's major advertising customers. I stand by my belief that CETV shares should be trading near $130 on 2008 prospects. If the company hits my 2009 estimates, I see the shares doubling. It will take a better market environment, improved sentiment toward emerging markets, and less risk aversion from investors to get the stock moving. But given this kind of upside, cheap valuation, great management and an almost perfect track record at the operating level, the risk-reward tradeoff is the most compelling in the media universe.