Tune in to TV

03/24/2006 12:00 am EST

Focus:

Vahan Janjigian

Editor, Bottom Line's Money Masters Stock Report

TV is not just short for television; it is also the NYSE symbol for Grupo Televisa, the largest media company serving the Spanish-speaking world. Here, Vahan Janjigian, editor of The Forbes Growth Investor, explains why investors should tune in to TV.

"With a dominant presence in television, radio, cable, and publishing, Grupo Televisa S.A. (TV NYSE) consists of four networks and 225 stations in Mexico, which reach 99% of the viewing population. These networks dominate the airwaves with about a 70% share of the total television audience and most of top 100 most-watched programs. It also licenses programs (including those produced by third parties) to domestic affiliates and International broadcasters, as well as to other pay television content distributors throughout the world.

"The largest of these licenses is to Univision, the leading Spanish language media company in the US. In fact, TV holds an 11% stake in Univision and provides nearly all of its programming content. The publishing segment runs Editorial Televisa, the leading publisher and distributor of magazines in Mexico, and the largest international publisher of Spanish-language magazines with more than 50 titles in 18 countries. Its also owns 51% of Cablevision, the largest cable operator in Mexico, and has radio operations, an Internet site, and produces and distributes feature films.

"While US counterparts have been struggling, TV has enjoyed strong growth. It hasn’t been hurt by newer platforms such as the Internet and wireless devices, most likely because market penetration of these new technologies in Mexico is still low. Even cable and satellite services lack the penetration they enjoy in the US. This has resulted in higher rates of over-the-air viewership in Mexico. TV has also benefited from the fact that Hispanic audiences in the US and elsewhere are considered an extremely attractive demographic to advertisers.

"Indeed, while traditional US networks compete aggressively with one another, Spanish-language broadcasters seem to have little trouble attracting advertisers. Net sales in 2005 were up 7.2% year-over-year to 32.48 billion pesos. The gross and operating margins improved to 54.58% and 33.26%, respectively, from 49.40% and 29.19%. Net income jumped 37.3%s.

"The company operates in a sometimes arbitrary regulatory environment and in regions marked by a high degree of economic and political instability, which makes an investment in the stock risky. Nonetheless, we believe trends are favorable. Rising ad rates should keep sales growing. There is even some speculation that TV may try to acquire all of Univision. It would have to overcome US rules limiting foreign ownership of broadcasters to do so, but if the acquisition succeeds, it will give it direct access to a lucrative Spanish-speaking audience. We have added TV to our Top 50 list."

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