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CME celebrated one year at the stock exchange
July 12, 2006, Hospodářské noviny
It was the last to join the Prague Stock Exchange in June of last year and so far it has not attracted many investors but nevertheless the American media group CME is doing relatively well and, according to experts, will continue to do well.
The “youngest” title on the domestic market is a company about which there is relatively little interest in this country. It definitely cannot compete with giants such as ČEZ or Komerční banka. Daily trading in its shares is on average 105 million crowns, for ČEZ the figure is roughly fifteen times as much. The “new boy”, which recently celebrated its first birthday on the stock exchange, is still fighting for its “place in the sun”.
“The reason is simple,” says Josef Dudek of the company Fio Burzovní. “Pragueis not a good exchange market for a media company’s shares. Investors tend to be drawn more towards the American stock exchange, shares in Praguebasically copy the trends there,” he explained.
The growth in GDP brings advertising
Shares in the media concern, which are traded on the American Nasdaq as well as in the Czech Republic, are not doing at all badly so far. Since their Prague launch last June they have strengthened by 15.6 percent, i.e. by two percent more than the main PX exchange index. Last month when the slumps caused by a fear of inflation and an increase in rates were still lingering on the global markets they were actually the second best of the domestic titles. In June they added a further 6.1 percent. The first days in June though were not so good for the owners of TV Nova. Yesterday the title lost 1.65 percent and fell to 1372 crowns per share.
According to Dudek, although CME’s shares are increasing no record results can be expected from them. “They are more likely to continue to copy the main index,” he believes.
Jan Procházka of Cyrrus is somewhat more optimistic. He still sees a lot of growth potential on the media markets of central and eastern Europe where CME is investing.
“As the economy in these countries grows the funds invested in advertising will also increase,” said Procházka.
Tibor Bokor of Wood & Company also agrees with this. In his opinion the question is whether investors will gamble on growth shares, such as CME, or will prefer stable shares. “The company definitely has a lot of acquisition potential - on a stable market, such as ours, its shares will certainly be very volatile. We shall see how investors react to them,” said Bokor. The American company operates nine television stations in six countries which broadcast to more than 82 million viewers every day. As well as Nova and Galaxie Sport in the Czech Republicit also owns three television stations inRomania. In Ukraine CME has the Studio 1+1 channel and it operates further channels inCroatia, Slovakia and Slovenia.
Nova the main force
The American company did very well from the re-purchase of TV Nova from the PPF financial group for 900 million dollars. In the first quarter 41 million dollars out of a total of 120 million flowed into CME through it. Although the company finished with a loss this did not make analysts particularly nervous. Its expansion policy in the Czech Republic, Slovakia, Romania, as well as inUkraine should soon bear fruit and get the company out of its losses.
“The company will most probably strengthen its role on the individual markets by developing its own activities - for example by creating new channels aimed at different viewers, preferably the competition’s customers,” Procházka believes. The company should also further expand its activities in the region. It is talking about entering the Russian market. CME also wants to significantly increase its 25-percent market share in Ukraine.
The company’s management has started a massive reorganisation in the Czech Republic. The management has so far been keeping the resulting form of the organisational structure secret but it should be known by the end of the summer. The whole process which is being carried out under the leadership of the Romanian supervisor Adrian Sarbu is aimed at saving costs and somewhat altering the shape of “Nova” entertainment which it wants to open up more to younger viewers.
However, the development of internet television stations and the start of digital broadcasting in the Czech Republiccould have a negative impact on CME’s shares. “This will increase competition and I am not entirely certain whether TV Nova will be able to maintain its current profits,” says Dudek regarding this problem. He sees more potential in eastern Europe than in our region. What’s more Nova has not yet even got a licence for digital broadcasting. The company’s founder and boss, Ronald Lauder, has also announced that he will be suing the Council for Radio and Television Broadcasting which has not granted it the licence. The competing station, Prima, is also trying to bite a large slice of the advertising cake. “Digital broadcasting will not attract the majority of advertisers to Nova until 2010. The restrictions on advertising on ČT will also bring it more advertisers,” Procházka says to allay fears.
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Profile of the company CETV
Graph
Net profit/loss and revenue
Graph
Annual development of CETV’s shares
The company’s shares on the Prague Stock Exchange
(this year’s monthly figures)
Market Exchange Rate Capitalisation alteration (billion crowns) at the end of the month (crowns) (%)
January 43.74 1435 1.8
February 42.71 1401 -2.4
March 52.75 1614 15.2
April 48.30 1463 -9.4
May 45.10 1314 -10.2
June 47.85 1394 6.1
** The net profit in 2003 exceptionally included an extra ten billion crowns gained from the arbitration with the Czech Republicthat was won over TV Nova.
For additional information, please contact:
Romana Wyllie
Vice President of Corporate Communications
Central European Media Enterprises
Krizeneckeho nam. 1078/5
152 00 Praha 5
Czech Republic
+420 242 465 525
romana.wyllie@cme-net.com
