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MUTUAL FUNDS NEWS
Minting money through Media
Fri, Apr 26, 2013
Source : Jeni Shukla, Citrus Interactive

India’s media and entertainment industry is expected to double in size to Rs.1.66 trillion by 2017 according to the Indian Media and Entertainment Industry Report 2013 by the Federation of Indian Chambers of Commerce and Industry (Ficci) and KPMG. A recent report by Credit Suisse highlights that the media and entertainment industry in India is poised to grow with healthy earnings in the next two years. The industry is going through once-in-a-lifetime transformation in the form of digitisation. Potential of rising advertising spends, TV penetration and increasing average revenue per user are some factors which may see a growth in this sector.


Currently media and entertainment stocks are part of various equity-diversified mutual funds. However, there are only two mutual funds which exclusively invest in this industry – Reliance Media & Entertainment Fund and Sundaram – Select Thematic Fund- Entertainment Opportunities Fund. We have done a comparative study of the two funds.


Size. Reliance Media & Entertainment has assets under management (AUM) worth Rs. 100 crores compared to Sundaram Entertainment Opportunities Fund’s small AUM of Rs. 33 crores.

Inception. Reliance Media & Entertainment was launched in September 2004 while Sundaram Entertainment Opportunities was launched in May 2008.

 

YTD

1 Year

3 Years

5 Years

SINCE INCEPTION

Reliance Media & Entertainment Fund(G)

-6.88

27.04

12.05

5.66

16.47

Sundaram-Select Thematic Funds-Enter Opp(G)

-9.12

17.42

-4.95

NA

5.50

CNX MEDIA

-7.72

32.40

-0.78

-2.86

NA

CNX Nifty

-3.77

7.31

2.69

3.72

NA

All figures are in % as on March 31, 2013; Returns above one-year in CAGR terms

Reliance Media & Entertainment Fund has outperformed vis-à-vis Sundaram Entertainment Opportunities in terms of returns in the year-to-date (YTD), one- and three- year periods. The only period in which it underperformed CNX Media is the one-year period. This may be due to an extremely strong performance of the CNX Media Index in the last one year. Interestingly, it has beaten Nifty in the one-, three- and five-year periods.

 

2008

2009

2010

2011

2012

Reliance Media & Entertainment Fund(G)

-63.07

65.21

15.58

-18.97

57.96

Sundaram-Select Thematic Funds-Enter Opp(G)

NA

47.12

1.34

-32.60

38.47

CNX MEDIA

-69.02

75.24

4.24

-33.28

58.67

CNX Nifty

-51.84

71.46

17.95

-24.62

27.70

All figures are in %

In terms of last five calendar year returns while having consistently retained the edge over Sundaram Select Thematic Fund, Reliance Media & Entertainment did better than CNX Media in three years - 2008, 2010 and 2011. The media and entertainment sector outperformed the broader market by a wide margin in 2012 owing to the onset of the digitalisation wave. It is important for us to see if this trend will continue in 2013 and which other subsectors will benefit from emerging trends such as further progress in digitisation, consolidation in the exhibitor space (PVR acquired Cinemax recently) etc.

No. of equity holdings. Currently Reliance Media and Entertainment Fund hold 11 stocks whereas Sundaram Select Thematic Funds – Enter Opp holds 17. Historically also Sundaram Enter Opp has held more number of stocks compared to Reliance Media and Entertainment Fund.

Company Concentration. Reliance Media & Entertainment Fund is less concentrated that Sundaram Select Thematic Funds – Enter Opp in terms of top three and five company holdings.

 

Top 3

Top 5

Top 10

Reliance Media & Entertainment Fund(G)

32.96

51.38

90.23

Sundaram-Select Thematic Funds-Enter Opp(G)

35.12

52.03

82.70


Churn. Reliance Media & Entertainment has a lower turnover ratio compared to Sundaram Select Thematic Funds – Enter Opp – 26 per cent compared to latter’s 63 per cent. The only phase when the latter had a lower turnover ratio was between July 2010 and August 2011. It is interesting to note that in the calendar year 2012 Reliance Media & Entertainment had an average turnover ratio of only 12 per cent compared to Sundaram’s 42 per cent. 

Expense Ratio. Both the funds have an expense ratio of 2.5 per cent.


Risk. In terms of risk measures such as standard deviation and beta (measured over the last three years) Reliance Media & Entertainment Fund is less risky than Sundaram
-Select Thematic Funds-Enter Opp.

 

Standard Deviation

Beta

Reliance Media & Entertainment Fund(G)

1.1043

0.6527

Sundaram-Select Thematic Funds-Enter Opp(G)

1.1926

0.7454

 

Risk-adjusted Returns. Reliance Media & Entertainment scores over Sundaram-Select Thematic Funds-Enter Opp in terms of risk-adjusted returns in terms of measures like Sharpe Ratio and Treynor Ratio (measured over last three years).

 

Sharpe Ratio

Treynor Ratio

Reliance Media & Entertainment Fund(G)

0.0278

0.0453

Sundaram-Select Thematic Funds-Enter Opp(G)

-0.0264

-0.0502

 

Portfolio Strategy – Last one year

Reliance Media & Entertainment Fund

The fund has almost 6 per cent of its equity portfolio exposed to IT sector.

 

Apr-12 (%)

Mar-13 (%)

Raised/lowered allocation (%age points)

TV18 Broadcast Ltd.


7.70

7.70

Info Edge (India) Ltd.


5.94

5.94

HT Media Ltd.

8.04

10.10

2.06

Hindustan Media Ventures Ltd.

7.80

9.36

1.56

Jagran Prakashan Ltd.

7.82

8.56

0.74

PVR Ltd.

8.82

9.06

0.24

Sun TV Network Ltd.

7.77

7.77

0.00

Zee Entertainment Enterprises Ltd.

12.59

12.56

-0.03

Hathway Cable & Datacom Ltd.

11.82

10.30

-1.52

Dish T V India Ltd.

9.53

7.67

-1.86

Hinduja Ventures Ltd

13.74

7.15

-6.59

Balaji Telefilms Ltd.

9.35


-9.35


The fund increased its exposure to TV18 Broadcast, Info Edge, HT Media, Jagran Prakashan and so on (see table above). It reduced allocation to Balaji Telefilms, Hinduja Ventures, Dish TV and so on.

Sundaram-Select Thematic Funds-Enter Opp

The fund has exposure, apart from media and entertainment, to sectors such as hotels, software, leisure facilities, consumer non durables and telecom-services.

 

Apr-12 (%)

Mar-13 (%)

Raised/lowered allocation (%age points)

Zee Entertainment Enterprises Ltd.


9.46

9.46

Sun TV Network Ltd.


4.68

4.68

TV18 Broadcast Ltd.

5.71

10.10

4.40

Eros International Media Ltd.


3.62

3.62

Den Networks Ltd.

4.00

7.26

3.26

Hathway Cable & Datacom Ltd.


2.82

2.82

PVR Ltd.

14.15

15.55

1.40

Inox Leisure Ltd.


0.91

0.91

Speciality Restaurants Ltd


0.80

0.80

Entertainment Network (India) Ltd.

5.17

5.89

0.73

 

Among its top holdings the fund raised allocation to Zee Entertainment, Sun TV, TV18 Broadcast and so on (see table above).

Fund Managers. Reliance Media & Entertainment Fund is managed by Sailesh Raj Bhan since April 2005. He is one of the senior fund managers at the AMC. Other funds managed by him are Reliance ELSS, Reliance Equity Opportunities and Reliance Pharma – all of which have a good track record. Sundaram Entertainment Opportunities is managed by J. Venkatesan since January 2012. Other funds managed by him include Sundaram Growth Fund, Sundaram Tax Saver, Sundaram Financial Services, Sundaram PSU Opportunities and Sundaram Rural India Fund.

Conclusion. Media and entertainment sector can be part of thematic allocation of aggressive investors. The only risk is that if this government is not re-elected the Phase 3 and 4 of digitisation may be jeopardised. However, if the economy revives, advertising revenue will grow stronger for many of the broadcasters. Reliance Media & Entertainment Fund has shown a better agility in the past and can be expected to realign the portfolio with emerging opportunities in future and is a preferred pick in this category.

 
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