initial coverage central european media enterprises files/cfa... · •cme markets (czech rep.,...

Initial coverage Central European Media Enterprises

CFA Investment Research Challenge

February 15, 2010

Prague

NASDAQ: CETVAs of December 20, 2009

2

CME Valuation Model Structure

2

Macro• Ad Market potential, Exchange rates• Stock market premium, Risk-free interest rate

Ad market

• TV Ad market share• Power ratios, Audience + Market shares, Margins

CME• Costs structure, Balance sheet structure• Beta, Financial + Operational leverage

Valuation• Sales, Costs, FCFs• Discount factors

RISKS !!!• Model adjustment,

Sensitivity analysis• Consideration of

potential risk factors

$29.47• Our target/fair stock price• Recommendation BUY• Upside potential

IMF Database,Reuters, Capital IQ,CME documents,Damodaran

Information Sources

3

Macroeconomic Analysis

• benchmark of developed core EU countries (Austria, Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Sweden, Switzerland, UK)

Convergence target

• PIGS countries (Portugal, Ireland, Greece, Spain)• Spain especially relevant because of the regime shift in 80sHistorical experience

• CME markets (Czech Rep., Slovak Rep., Slovenia, Croatia, Bulgaria, Ukraine)Current potential

• Prices, volume and quality of goods, exchange rates, labour productivity, interest ratesLong-term in GDP

• Ad prices, Ad volume, structure of advertised productsShort-term in Ad Intensity

Two ways of convergence Channels of convergence

Our model

Convergence of CEE Markets

RisksIndustry overview Business model Financial analysis ValuationConvergence

4


Source: IMF Database, Our estimates.

Macroeconomic AnalysisConvergence of CEE Markets


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GDP Index (Convergence in GDP)

Convergence of PIGS to Core EU Countries

PIGS (1983)

Core EU (1983)

PIGS (1983)

Core EU (1983)

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PIGS (1983)

Core EU (1983)

PIGS (1984)

Core EU (1984)

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PIGS (1983)

Core EU (1983)

PIGS (1985)

Core EU (1985)

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PIGS (1983)

Core EU (1983)

PIGS (1986)

Core EU (1986)

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PIGS (1983)

Core EU (1983)

PIGS (1987)

Core EU (1987)

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PIGS (1983)

Core EU (1983)

PIGS (1988)

Core EU (1988)

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PIGS (1983)

Core EU (1983)

PIGS (1989)

Core EU (1989)

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PIGS (1983)

Core EU (1983)

PIGS (1990)

Core EU (1990)

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PIGS (1983)

Core EU (1983)

PIGS (1991)

Core EU (1991)

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Core EU (1983)

PIGS (1992)

Core EU (1992)

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Core EU (1983)

PIGS (1993)

Core EU (1993)

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PIGS (1983)

Core EU (1983)

PIGS (1994)

Core EU (1994)

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PIGS (1983)

Core EU (1983)

PIGS (1995)

Core EU (1995)

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PIGS (1983)

Core EU (1983)

PIGS (1996)

Core EU (1996)

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PIGS (1983)

Core EU (1983)

PIGS (1997)

Core EU (1997)

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PIGS (1983)

Core EU (1983)

PIGS (1998)

Core EU (1998)

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Core EU (1983)

PIGS (1999)

Core EU (1999)

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PIGS (2000)

Core EU (2000)

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PIGS (2001)

Core EU (2001)

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PIGS (2002)

Core EU (2002)

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Core EU (2003)

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Convergence of CEE and PGS to Core EU Countries

CEE (2003)

PGS (2003)

Core EU (2003)

PIGS (2003)

Core EU (2003)

CEE (2003)

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CEE (2004)

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CEE (2005)

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CEE (2007)

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PIGS (2008)

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CEE (2008)

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CEE (2009E)

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CEE (2010E)

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PIGS (2008)

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CEE (2011E)

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CEE (2012E)

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CEE (2013E)

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CEE (2003)

PGS (2003)

Core EU (2003)

PIGS (2008)

Core EU (2008)

CEE (2014E)

37Risks



Industry overview Business model Financial analysis ValuationConvergence

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CEE (2015E)

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CEE (2003)

PGS (2003)

Core EU (2003)

PIGS (2008)

Core EU (2008)

CEE (2016E)

39

TV media industryTrends and impact of economic downturn

Economic downturn

• TV ad as a strongly pro-cyclical industry• Decrease in TV ad demand• Profitability deterioration

Industry trends

• Alternative devices• Non-linear broadcastingTechnology

Audience

Content

Advertisers

• Control over content• Segmentation

• Customer loyalty• Additional revenue pipeline

• Narrow target audience• Reasonable price


40

Business Model

Geographical Presence

Multichannel strategy in a region with growth potential

TV Broadcasting

Internet

Content

Revenue Streams

• 95%+ on total• Multichannel strategy• Convergence of the region

• Acquisitions• User generated content• Portals

• Media Pro• Own production• Cost reductions

CZ (2009)EBITDA: 134m

SLO (2009)EBITDA: 17.6m

HR (2009)EBITDA: 1.5m

BG (2009)EBITDA: -41m

RO (2009)EBITDA: 54m

SVK (2009)EBITDA: 17.4m

UKR (2009)EBITDA: -54m

Revenues: > 100mRevenues: < 100mProblems

CME market share


41

Strategic outlook of CMELong-term position looks tentatively positive

Market size

Market share

Convergence in GDP and Ad intensity

Decrease of importance of TV

Boom in new media ?Decrease of power ratios

Multi-channeling

Local Content

Cross Selling

Internet ?

ImpactFactorDimension


42

Financial AnalysisLow margin and high indebtedness

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0.0 $200.0 $400.0 $600.0 $800.0 $

1,000.0 $1,200.0 $1,400.0 $1,600.0 $1,800.0 $2,000.0 $

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Revenues (mil. USD) EBITDA margin (%) $0

$200

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$1,200

$1,400

$1,600

2009 2010 2011 2012 2013 2014 2015 2016

Senior Convertible Notes (3.50%; USD)

2007 Floating Notes (5.65%; EUR)

2009 Fixed Notes (11.625%;EUR)

2012 refinancing Senior Convertible Notes (9.00%)

2013 refinancing Floating Notes 2007 (8.00%)

2016 refinancing Fixed Notes 2009 (7.00%)

New Debt (7.00%)

Total Debt/EBITDA 2009 2010 2011 2012 2013 2014 2015 2016

14.7x 7.9x 5.2x 4.2x 3.6x 3.1x 3.0x 3.0x

Peer Group’s

Revenues and EBITDA margin Debt Structure


Peer Group: CTC Media, MTG , RTL Group, TVN S.A:, Media Capital S.G.P.S., Mediaset SpA

Source of data: Capital IQ

43

Upside potential24.1%

DCF Model•3 phase model

1.phaseAd market and GDP

convergence 21.6%-11.1%

2.phase GDP convergence 8.0-5.0%

3.phase Stabilized markets 4.00%

WACCCost of Equity (CAPM)

Source Initial value GraduallyRisk free rate 30-year UST 4.38% constantUnlevered Beta See back-up 2.00 decreasingMarket Premium Damodaran 4.50% constantCountry Risk Damodaran 2.92% decreasingWACC 16.66% decreasingCost of Debt Interest Paid/Total DebtCapital Structure Iterated from the modelTax Rate 20.0% constant

The value of CME is given by its future cash flows…

$41.45$38.61

$26.50

$18.66

$21.44

$4.67

-$10.50

$3.72

-$20

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Target Price $29.47

MarketPrice $23.75

Share price (in USD per diluted share)as of 20/12/2009

Valuation summary

•Media Pro synergies valued separately

Source: Capital IQ, Damodaran, Bloomberg, own estimates, Thomson One


growth

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Investment risksThe most sensitive assumptions of the valuation

• Deterioration of revenuesProlonged economic recession

Financial distress

FX risk

Execution risks

• High financial leverage

• Revenues in CEE currencies• Debts in EUR and USD

• Ukraine and Bulgaria• Media PRO

Risk Description Weight

Alternative broadcasters • Acceleration of the trend• Slow adaptation

!!!!!

!!!!

!!!

!!

!RisksIndustry overview Business model Financial analysis ValuationConvergence

45

recommendation on CME stock:

BUYTARGET PRICE: $29.47

Back up

47

CME WACC Analysis

Company Comp SetCompany Name 5 Year Beta LTM Total Debt/CapitalCTC Media, Inc 2.5 8.2%Media Capital S.G.P.S. 0.7 53.3%Mediaset SpA 0.9 40.8%Modern Times Group Mtg AB 2.1 35.0%RTL Group 0.6 3.1%TVN S.A. 0.9 61.5%

High 2.5 61.5%Low 0.6 3.1%Mean 1.3 33.6%Median 0.9 37.9%

CME Levered Beta Total Debt/CapitalCapital IQ 3.40 57.8% Money Central MSN 3.55Yahoo Finance 3.72Thomson One 3.55Google Finance 3.59

Mean 3.56Median 3.55

Unlevered BetaDamodaran (2007,entrtainment) 1.17Calculated (using median) 2.10

Initial Unlevered Beta for 2010 2.00

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WACC Cost of Debt

Cost of Equity Unlevered Beta

As of 12/20/2009

( )( )cUL tED ++= 1*/1*ββ( ) kCountryRisemiumMarketRCAPM Lf ++ Pr*: β

Formulas and Notes

)1(*)/(*)/(* cde tCDRCERWACC −+=

Comparable Beta Analysis Capital Asset Pricing Model, WACC

1.phase 2.phase 3.phase

Unlevered Beta 2.0 1.9-1.1 1.0

30-year UST 4.38% 4.38% 4.38%Market Premium 4.50% 4.50% 4.50%Country Risk 2.92% 2.82%-1.52% 1.42%Cost of Equity 23.27-17.99% 17.53-11.60% 11.14%

Cost of Debt 9.51%- 7.42% 7.84%-6.54% 6.44%Total Debt/Capital 56%-20% 20% 20%

Source: Capital IQ

Source: Company’s documents, own estimates, CapitalIQ

48

Valuation of MediaPro Synergies

n MediaPro revenues included in DCF Model

n Synergies valued separately

Synergies 2010 2011 2012 TVCost Savings $1.0 $2.0 $1.0Cost Savings after tax implications 0.8 1.7 0.8Revenues cross-selling CME&MediaPRo 1.2 2.0 1.7Additional Revenues Margin 35.0% 35.0% 35.0% 35.0%Tax Rate 20.0% 20.0% 20.0% 20.0%Grow th in TV 4.0%Cummulative total impact on Net Income $1.2 $3.4 $4.8 $26.7

Discount Factor 17.0% 17.0% 17.0% 17.0%Present Value of Synergies (12/20/09) $33.4

In USD Millions

Source: CME documents, own estimates

n Public Comparables Method: EBITDA 09LTM normalized (source: Capital IQ)

49

Foreign Exchange & Debt Structure

* Basket of CEE currencies (BGN, HRK, CZK, RON, HRN) against EUR.Source: own estimates, IMF, EIU

FX StructureAccounting unit Locals CZK USD EURRevenues 100%

Operating costs 100%Cost of programming 50% 50%General & Admin 100%Depreciation 100%Amortization 100%

Corporate operating costs 33% 33% 33%

Source: CME documents

LT Debt Structure and Maturity

$475.0

$219.6

$644.3

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2012 2013 2016

$475m

€150m

€440m

in millions

LT Debt in USD Value Cry Maturity RateSenior Convertible Notes 475.0 475.0 USD Mar-15-2013 3.500% 2007 Floating Notes 219.6 150.0 EUR May-15-2014 6-month EURIBOR + 1.625%2009 Fixed Notes 644.3 440.0 EUR 2016 11.625%

(1) 2007 Floating Notes has covenant: :Coverage ratio(EBITDA/int.expenses)>2.0x

(2) CME’s LT Debt goal is 3xEBITDA(3) Source: CME documents, own estimates

Total Debt/ EBITDA 2009 2010 2011 2012 2013 2014 2015 2016

14.7x 7.9x 5.2x 4.2x 3.6x 3.1x 3.0x 3.0x

+ 1% 0% - 1% - 2% - 3%+ 3% $ 29.06 $ 29.63 $ 30.23 $ 30.87 $ 31.54 + 2% $ 28.71 $ 29.26 $ 29.85 $ 30.47 $ 31.13 + 1% $ 28.37 $ 28.90 $ 29.47 $ 30.07 $ 30.71 0% $ 28.03 $ 28.55 $ 29.10 $ 29.69 $ 30.31

- 1% $ 27.70 $ 28.20 $ 28.74 $ 29.31 $ 29.91

USD/EURCEE/EUR*

Analysis of Alternative FX Scenarios(prediction of FX relative changes for period of 2010-2016)

Interest Coverage (EBITDA/Interest Expense) 2009 2010 2011 2012 2013 2014 2015 2016

0.9x 1.7x 2.6x 3.2x 3.2x 3.4x 3.5x 4.2x

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Capital Expenditures

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2009 2010 2011 2012 2013 2014 2015 2016

D&A

CAPEX

In USD millions

Source: Company’s documents, own estimates

(1) Capital expenditures modeled as a percentage of revenues (based on history).(2) Depreciation as a percentage of PP&E (portion based on history). Amortization of programming as a percentage of

total programming (based on history).

51

Costs structure

0100200300400500600700800900

Operating costs Cost of programming

Station selling, general and admin. exp.

Operating costs

21%

Cost of program

ming63%

Station selling, general

and admin.

exp.16%

2009

Operating costs

64%

Cost of program

ming0%


and admin.

exp.36%

2001Operating costs

21%

Cost of program

ming66%


and admin.

exp.13%

2016

Source: Company’s documents, own estimates. CapitalIQ

52

CME Report (1) Market Profile

Current Price (12/20/09) $23.75 52-Week High (9/18/09) 38.61 52-Week Low (3/09/09) 4.67 Daily Volume 0.34Dividend Yield (estimated) N/ACurrent Price (12/20/09) 23.75 % of 52-Week High 61.5% % of 52-Week Low 508.6% % of 52-Week Range 56.2%

Total Basic Common Shares 63.5Market Capitalization 1,509.0

Float 38.0%Held by Insiders 16.4%Held by Institutions 42.1%

Book Value per Share 49.8Debt to Total Capital 57.8%Return on Equity -26.6%Source: Thomson One, Capital IQ

in $Mn, expect per share dataMarket profile

0

500

1000

1500

2000

2500

3000

0

20

40

60

80

100

120

Jan

-06

Mar

-06

May

-06

Jul-0

6

Sep

-06

Nov

-06

Jan

-07

Mar

-07

May

-07

Jul-0

7

Sep

-07

Nov

-07

Jan

-08

Mar

-08

May

-08

Jul-0

8

Sep

-08

Nov

-08

Jan

-09

Mar

-09

May

-09

Jul-0

9

Sep

-09

Nov

-09

Jan

-10

CETVNASDAQ

Beginning of liquidity crunch

Market Crash

RefinancingTime Warner investment announced

Acquisition of MediaPro announced

Deal with Kolomoisky

53

CME Report (2) Valuation

Valuation in $MnPV 1.phase $634.9PV 2.phase 1,144.1PV terminal value 1,168.4Enterprise Value $2,947.4PV of synergies 33.4Total Enterprise Value $2,980.7Net Debt 1,108.6Total Equity Value $1,872.1No. of diluted shares 63.5Value per diluted share $29.47No. of diluted shares from the latest fillings w ith SEC

1.phase 21%

2.phase39%

3.phase (TV)39%

synergies1%

Composition of total enterprise value

Assumptions1.phase

(2010-2016)2.phase

(2017-2030)3.phase

(Terminal value)rf 4.38% 4.38% 4.38%country risk 2.92% 2.82%-1.52% 1.42%unlevered β 2.0 1.9-1.1 1.0levered β 3.6-2.4 2.3-1.3 1.2market premium 4.50% 4.50% 4.50%Re (CAPM model) 23.27-17.99% 17.53-11.60% 11.14%Rd 9.51%- 7.42% 7.84%-6.54% 6.44%WACC 16.67%-15.77% 15.38%-10.38% 9.00%growth 8.00-5.00% 4.00%PV (in $Mn) $634.9 $1,144.1 $1,168.4Source: Thomson One, CME, CapitalIQ, Damodaran data, ow n estimates

Growth in TV/ Value Per Diluted Share∆ in WACC 3.0% 4.0% 5.0%

-2.00% $49.90 $61.34 $84.22-1.00% $35.70 $41.45 $51.03

-- $26.25 $29.47 $34.281.00% $19.51 $21.44 $24.142.00% $14.47 $15.68 $17.30

Growth in TV/ Implied EBITDA Multiple∆ in WACC 3.0% 4.0% 5.0%

-2.00% 46.0x 53.8x 69.5x-1.00% 36.3x 40.2x 46.8x

-- 29.9x 32.1x 35.4x1.00% 25.3x 26.6x 28.4x2.00% 21.8x 22.6x 23.7x

based on the expected 2009EBITDA

Growth in TV/ Implied EBITDA Multiple∆ in WACC 3.0% 4.0% 5.0%

-2.00% 24.3x 28.4x 36.7x-1.00% 19.2x 21.2x 24.7x

-- 15.8x 16.9x 18.6x1.00% 13.3x 14.0x 15.0x2.00% 11.5x 11.9x 12.5x

based on the expected 2010EBITDA

54

CME Report (3) Business by Business

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

EBITDA margin ($mil.)

Revenues

EBITDA margin

Source: CME Documents, Our estimates.

55

CME Report (4) Others

59%24%

10%

7%

Equity structure - value

Class A Public Float

Class A Time Warner

Class B Launder Family

Class B Time Warner

26%

10%

44%

20%

Equity structure - voting rights

Class A Public Float

Class A Time Warner

Class B Launder Family

Class B Time Warner


56

CME Report – Income Statement

Income Statement

For the Fiscal Period Ending Dec-31-2007

Dec-31-2008

Dec-31-2009

Dec-31-2010

Dec-31-2011

Dec-31-2012

Dec-31-2013

Dec-31-2014

Dec-31-2015

Dec-31-2016

Revenue $838.9 $1,019.9 $719.6 $826.4 $1,005.1 $1,186.9 $1,362.7 $1,534.2 $1,711.0 $1,901.2 grow th 39.2% 21.6% -29.5% 14.8% 21.6% 18.1% 14.8% 12.6% 11.5% 11.1%

Cost Of Revenue 501.7 670.5 565.3 612.8 676.7 776.2 882.7 986.6 1,093.7 1,207.7 Operating costs 116.9 145.2 121.0 124.0 145.7 170.3 193.5 215.6 237.8 261.4 Cost of programming 327.2 438.2 374.2 396.7 432.2 498.5 572.3 644.4 718.6 798.5 Depreciation & Amort. 32.7 51.7 51.1 58.0 63.0 70.0 78.6 88.3 99.0 110.7 Amortization of broadc. licenses and other intang. 25.0 35.4 19.0 34.1 35.8 37.4 38.3 38.4 38.2 37.1 Gross Profit 337.1 349.5 154.3 213.6 328.4 410.7 480.0 547.6 617.4 693.5

Station selling, general and administrative expenses 71.3 90.8 95.1 95.0 109.8 123.2 134.4 143.7 152.3 160.7Corporate operating costs 55.4 49.7 36.3 34.5 50.3 59.3 68.1 76.7 85.6 95.1 Other Operating Exp., Total 126.7 140.5 131.4 129.5 160.1 182.5 202.5 220.4 237.8 255.8 Operating Income (EBIT) 210.5 209.0 22.9 84.1 168.3 228.2 277.5 327.2 379.6 437.8

Interest Expense -54.9 -68.5 -100.0 -100.0 -101.9 -103.9 -124.6 -133.3 -145.7 -139.5Interest and Invest. Income 5.7 10.0 5.8 8.9 8.8 10.2 13.3 17.8 22.5 27.6 Net Interest Exp. -49.2 -58.5 -94.2 -91.1 -93.1 -93.7 -111.3 -115.5 -123.2 -111.9

Currency Exchange Gains (Loss) -38.1 -31.5 120.0 7.2 31.1 73.9 116.5 159.9 206.2 264.5Other Non-Operating Inc. (Exp.) 7.9 2.6 EBT Excl. Unusual Items 131.0 121.6 48.7 0.2 106.3 208.4 282.6 371.6 462.6 590.4

Unusual Items Total -19.4 -336.8 -90.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 EBT Incl. Unusual Items 111.6 -215.2 -41.7 0.2 106.3 208.4 282.6 371.6 462.6 590.4

Income Tax Expense 20.8 34.5 0.0 0.0 21.3 41.7 56.5 74.3 92.5 118.1Minority Int. in Earnings -17.2 -2.1 -9.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Earnings from Cont. Ops. 73.7 -251.8 -51.5 0.1 85.0 166.7 226.1 297.3 370.1 472.3

Earnings of Discontinued Ops. -4.5 -3.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Extraord. Item & Account. Change 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net Income $69.2 -$255.6 -$51.5 $0.1 $85.0 $166.7 $226.1 $297.3 $370.1 $472.3


57

CME Report – Balance Sheet

Balance Sheet

as of Dec-31-2007

Dec-31-2008

Dec-31-2009

Dec-31-2010

De c-31-2011

Dec-31-2012

Dec-31-2013

Dec-31-2014

Dec-31-2015

Dec-31-2016

ASSETSCash And Equivalents $142.8 $107.4 $466.9 $424.5 $453.0 $569.2 $758.1 $1,021.8 $1,228.7 $1,527.1Restricted Cash 1.3 0.8

Total cash 144.1 108.3 466.9 424.5 453.0 569.2 758.1 1,021.8 1,228.7 1,527.1

Accounts Receivable 224.7 221.5Other Receivables 5.1 4.7Notes Receivable 1.9 0.0 Total Receivable s 231.8 226.1 262.2 289.8 338.7 383.7 421.9 453.9 482.8 510.5

Productions in progress (other) 5.7 14.1 18.0 21.6 25.9 31.1 37.3 44.8 53.7 64.5Prepaid Exp. (paid programming & other prepaid expenses) 62.6 61.6 65.9 66.6 67.2 67.9 68.6 69.3 70.0 70.7Deferred Tax Assets, Curr. (other) 3.7 5.9 12.2 12.2 12.2 12.2 12.2 12.2 12.2 12.2Other Current Assets 87.3 79.5 138.0 147.2 165.2 178.9 186.7 189.1 187.5 182.3 Total Current Ass ets 535.1 495.4 963.2 961.9 1,062.3 1,243.0 1,484.8 1,791.2 2,035.0 2,367.3

Gross Property, Plant & Equipment 316.1 359.5 451.5 509.4 589.8 684.7 793.8 916.5 1,053.4 1,205.5Accumulated Depreciation -140.8 -152.8 -245.6 -303.6 -366.6 -436.6 -515.1 -603.4 -702.4 -813.1 Net Prope rty, Plant & Equipm ent 175.3 206.7 206.0 205.8 223.2 248.2 278.6 313.0 350.9 392.4

Long-term Investments 16.6 16.6 16.6 112.0 112.0 112.0 112.0 112.0 112.0 112.0Goodw ill 1,114.3 1,041.0 1,158.3 1,158.3 1,158.3 1,158.3 1,158.3 1,158.3 1,158.3 1,158.3Program rights (net), broadcast licenses and other intg.assets 481.8 628.3 543.7 559.1 572.8 575.0 562.1 545.4 509.9 468.4Other: Loans Receivable (related to 3rd parties) 0.0 0.0 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2Other: Deferred Tax, LT 2.1 2.1 13.2 13.2 13.2 13.2 13.2 13.2 13.2 13.2Other: Deferred Charges, LT (capitalized debt costs) 10.3 14.8 21.8 21.8 21.8 21.8 21.8 21.8 21.8 21.8Other: (production in progress, other) 2.9 3.9 7.6 7.6 7.6 7.6 7.6 7.6 7.6 7.6Total Ass ets $2,338.4 $2,408.7 $2,935.5 $3,044.8 $3,176.4 $3,384.2 $3,643.5 $3,967.7 $4,213.8 $4,546.1

LIABILITIESAccrued current liabilities and others $181.5 $156.4 $258.3 $275.8 $312.0 $342.7 $365.8 $383.1 $397.3 $410.6Accounts Payable 37.9 35.8 43.4 49.6 60.0 70.5 80.5 90.2 100.1 110.6Credit facilities and obligations under capital leases 15.1 36.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Senior Notes being redeemed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Current Liabilities 234.5 228.7 301.6 325.4 372.0 413.1 446.3 473.2 497.4 521.2

Long-Term Debt 585.6 1,063.5 1,365.5 1,401.1 1,401.1 1,401.1 1,401.1 1,401.1 1,550.3 1,756.5Def . Tax Liability, Non-Curr. 73.3 89.1 77.3 77.3 77.3 77.3 77.3 77.3 77.3 77.3Other Non-Current Liabilities 22.0 23.1 13.5 13.5 13.5 13.5 13.5 13.5 13.5 13.5Total Liabilities 915.5 1,404.4 1,758.0 1,817.4 1,863.9 1,905.1 1,938.3 1,965.2 2,138.6 2,368.6

Common Stock 3.4 3.4Additional Paid In Capital 1,051.3 1,018.5Retained Earnings 53.6 -224.1Comprehensive Inc. and Other 291.5 203.3

The beginning balance 1,001.2 1,184.1 1,234.0 1,319.0 1,485.7 1,711.8 2,009.0 2,081.8Additional Paid In Capital in the year / (dividends) 234.4 49.8 0.0 0.0 0.0 0.0 -297.3 -370.1Net income -51.5 0.1 85.0 166.7 226.1 297.3 370.1 472.3

Total Com m on Equity 1,399.8 1,001.2 1,184.1 1,234.0 1,319.0 1,485.7 1,711.8 2,009.0 2,081.8 2,184.1

Minority Interest 23.2 3.2 -6.6 -6.6 -6.6 -6.6 -6.6 -6.6 -6.6 -6.6 Total Equity 1,423.0 1,004.4 1,177.5 1,227.4 1,312.4 1,479.1 1,705.2 2,002.4 2,075.2 2,177.5

Total Liabilities And Equity $2,338.4 $2,408.7 $2,935.5 $3,044.8 $3,176.4 $3,384.2 $3,643.5 $3,967.7 $4,213.8 $4,546.1 Source: Company’s documents, own estimates. CapitalIQ

58

CME Report – Cash Flow

Projected Cash FlowDec-31-

2009Dec-31-

2010Dec-31-

2011Dec-31-

2012Dec-31-

2013Dec-31-

2014Dec-31-

2015Dec-31-

2016Operating ActivitiesNet Income -$51.5 $0.1 $85.0 $166.7 $226.1 $297.3 $370.1 $472.3Depreciation 51.1 58.0 63.0 70.0 78.6 88.3 99.0 110.7Amortization 19.0 34.1 35.8 37.4 38.3 38.4 38.2 37.1Programming balance -10.1 0.0 10.8 12.0 26.3 29.0 46.4 50.3Minority interest expense / (income) -9.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0(Increase)/decrease in working capital 0.2 -17.3 -25.4 -23.4 -19.6 -15.8 -12.8 -10.0(Increase)/decrease in other long-term assets -144.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0Increase/(decrease) in other long-term liabilities -21.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Cash Flow from Operating Activities: -166.7 75.1 169.2 262.7 349.7 437.1 540.8 660.3

Investing ActivitiesCapital expenditures -50.4 -57.8 -80.4 -95.0 -109.0 -122.7 -136.9 -152.1Additions to intangibles 75.7 -49.6 -60.3 -51.6 -51.8 -50.6 -49.1 -45.9Long Term Investments 0.0 -95.4 0.0 0.0 0.0 0.0 0.0 0.0

Cash Flow from Investing Activities: 25.3 -202.8 -140.7 -146.5 -160.8 -173.3 -186.0 -198.0

CASH FLOW AVAILABLE FOR FIN. ACT. -$141.4 -$127.8 $28.5 $116.2 $188.9 $263.8 $354.9 $462.3

Financing ActivitiesIssuance / (repayment) of revolver -36.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0Issuance of long-term debt 302.1 35.6 0.0 0.0 475.0 219.6 149.2 850.5(Repayment) of long-term debt 0.0 0.0 0.0 0.0 -475.0 -219.6 0.0 -644.3Additional paid in capital/ (dividends) 234.4 49.8 0.0 0.0 0.0 0.0 -297.3 -370.1

Cash Flow from Financing Activities: 500.0 85.4 0.0 0.0 0.0 0.0 -148.1 -163.9

Net Change in Cash 358.6 -42.4 28.5 116.2 188.9 263.8 206.8 298.5Beginning cash balance 108.3 466.9 424.5 453.0 569.2 758.1 1,021.8 1,228.7Ending cash balance $466.9 $424.5 $453.0 $569.2 $758.1 $1,021.8 $1,228.7 $1,527.1

as of


59

CME Report – Segment Sales and EBITDA

Segment Sales (in USD m) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Bulgaria n.a. 1.3 3.2 5.0 7.8 11.8 17.2 24.3 33.6 45.7 Croatia 37.2 54.7 46.8 52.5 63.8 75.7 87.8 100.2 113.2 126.9 Czech Republic 279.2 376.5 289.6 317.6 369.0 413.5 449.8 480.7 509.1 536.5 Romania 215.4 274.6 180.9 205.4 250.3 294.9 334.6 368.8 399.3 427.3 Slovakia 110.5 132.7 110.0 122.9 152.7 179.9 202.7 221.9 238.0 252.1 Slovenia 69.6 80.7 67.4 68.2 75.6 80.9 85.0 88.1 90.6 92.7 Ukraine 126.8 102.4 21.5 55.4 88.0 134.1 191.7 258.8 338.6 434.2

Segment EBITDA (in USD m) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Bulgaria n.a. -10.2 -41.0 -36.5 -32.4 -27.7 -20.0 -8.6 6.8 26.6 Croatia -13.9 5.4 1.5 5.3 12.0 16.9 21.9 27.8 34.3 41.4 Czech Republic 156.5 208.7 134.1 150.3 179.9 192.2 194.5 191.7 185.0 174.6 Romania 93.1 111.8 53.9 69.1 96.8 115.8 128.4 136.1 139.0 137.4 Slovakia 41.5 50.2 17.4 26.8 48.0 61.8 71.2 78.5 83.1 85.4 Slovenia 22.8 25.4 17.6 18.7 24.0 25.5 26.6 28.1 29.9 32.1 Ukraine 23.5 -33.8 -54.3 -31.1 -15.0 7.5 38.9 78.4 128.3 190.7


60

CME Report – GDP Convergence

Source: IMF. own estimates

History and IMF prediction

61

CME Report – Ad Intensity Convergence

Source: IMF ,own estimates

History and our prediction

62

CME Report - Market PositionsAudience Share * Power Ratio = Market Share

Source: CME Documents, own estimates

63

CME Report – Trading Multiples

Company Comp SetCompany Name TEV/Total

Revenues LTMTEV/EBITDA LTM TEV/EBIT LTM P/Diluted EPS

Before Extra P/TangBV LTM TEV/Forward

Total Revenue TEV/Forward EBITDA NTM

Forward P/E NTM

CTC Media, Inc (NasdaqGS:CTCM)

4.45x 9.59x 10.39x NM 17.11x 4.2x 10.5x 16.8x

Media Capital S.G.P.S. (ENXTLS:MCP)

1.90x 12.07x 17.55x - -

Mediaset SpA (CM:MS) 2.07x 13.04x 17.48x 21.84x NM 2.0x 7.9x 18.6xModern Times Group Mtg AB (OM:MTG B)

1.81x 11.14x 12.19x 16.46x NM 1.7x 12.5x 14.9x

RTL Group SA (BDL:006146252) 1.32x 8.70x 10.12x NM 4.62x 1.3x 8.3x 15.0xTVN S.A. (WSE:TVN) 3.02x 13.00x 19.16x 17.36x NM 2.6x 9.6x 17.4x

Central European Media Enterprises Ltd. (NasdaqGS:CETV)

3.55x 20.85x 69.65x NM NM 3.3x 20.0x NM

Summary Statistics TEV/Total Revenues LTM

TEV/EBITDA LTM TEV/EBIT LTM P/Diluted EPS Before Extra

P/TangBV LTM TEV/Forward Total Revenue

TEV/Forward EBITDA NTM

Forward P/E NTM

High 4.45x 13.04x 19.16x 21.84x 17.11x 4.2x 12.5x 18.6xLow 1.32x 8.70x 10.12x 16.46x 4.62x 1.3x 7.9x 14.9xMean 2.43x 11.26x 14.48x 18.55x 10.86x 2.4x 9.8x 16.5xMedian 1.98x 11.60x 14.84x 17.36x 10.86x 2.0x 9.6x 16.8x

Source: Capital IQ as of 12/20/2009

All values in millions, except per share data and ratios

64

UkrainePut option was exercised and $300mil. earned

• Partnership with Igor Kolomoisky

• Channels: Studio 1+1, Kino, TET TV

• Losing market position – investments made

• Political risk

Situation before

• Operations sold to Kolomoisky for $300m

• Market abandoned

Today

$29.14

- 1%

$29.47

Target price:

65

CME as of 2/11/2010

0

5

10

15

20

25

30

35

40

12.2

.200

9

26.2

.200

9

12.3

.200

9

26.3

.200

9

9.4.

2009

23.4

.200

9

7.5.

2009

21.5

.200

9

4.6.

2009

18.6

.200

9

2.7.

2009

16.7

.200

9

30.7

.200

9

13.8

.200

9

27.8

.200

9

10.9

.200

9

24.9

.200

9

8.10

.200

9

22.1

0.20

09

5.11

.200

9

19.1

1.20

09

3.12

.200

9

17.1

2.20

09

31.1

2.20

09

14.1

.201

0

28.1

.201

0

NasdaqGS:CETV - Share Pricing Price Target

PRICE TARGET:$29.14

UPSIDE:+6,6%

In USD; as of 2/11/2010

Source: CapitalIQ, own estimates