In late 2020, the Government of Zimbabwe made a move to liberalise the electronic media landscape when it issued six new television licences.
Amongst successful applicants was Zimpapers Television Network (ZTN), which was awarded a free-to-air television network license by the Broadcasting Authority of Zimbabwe (BAZ).
It has also been reported that 14 of the 48 television and radio transmitters being set up across the country to improve broadcasting services are now ready for commissioning.
These transmitters are used for terrestrial (over-the-air) television broadcasting. They radiate radio waves that carry a video signal representing moving images, along with a synchronised audio channel, which is received by television receivers belonging to a public audience.
This presents an exciting opportunity for new TV channels like ZTN.
From a global context, television and video delivery platforms are becoming increasingly complex as viewing preferences move towards a world in which content is available on-demand. The development of the internet has also seen the growth of online video platforms, which has given rise to changing behaviours of viewers around the world, as well as new competitors to traditional TV players.
Mobile video consumption is also growing rapidly, driven by the growth in smartphone adoption and advanced 4G mobile data networks. That said, in the wider media advertising context, TV is still the most widespread content-based medium.
Advertising markets have been characterised by the rise of online and mobile, deterioration of print and stability of TV. Between 2010-2015, newspapers and magazines declined at a compound annual growth rate of 5.8%. This was largely due to print budgets migrating online and the strong growth in interactive advertising. Throughout this time, TV advertising has remained stable, driven mainly by economic factors and quadrennial events (elections and sports competitions). Brand advertisers have remained loyal to the medium and perceive television as an effective tool in achieving their marketing goals.
ZTN owner; Zimpapers Limited recently reported its FY2020 results showing a marginal increase in revenue of 3.5% to ZWL1.3bn driven by the newspaper and broadcasting divisions. The commercial printing division saw a 13% decline in revenue due to depressed demand and raw material supply side constraints.
The company’s business model remains focused on investing in digital platforms in response to a shift in consumer behaviour following the pandemic. Going forward, we opine that costs from the commercial printing division will likely go down as the company embraces full digitalization.
The broadcasting division is also set to benefit from demand for content amongst consumers as they prefer accurate and reliable information on Covid-19, the economy, politics and social issues that affect them.
Based on our estimates, the stock trades on an undemanding Fwd PER of 8.6x versus a peer average of 10.5x. We rate the stock BUY!