CTC Media

This is a story in today's Investors Business Daily about CTCM one of my two stocks I am currently researching. Enjoy:

BY ALAN R. ELLIOTT
INVESTOR'S BUSINESS DAILY
In Russia, the word is puhlt. That’s what they call the remote control for a television set. Russia’s puhlts are being put to more regular use lately, as TV advertising takes hold and more former Soviet citizens grasp the value of a
mutebutton. A leading crusader in the rise of capitalist-style broadcast advertising in Russia is CTCMedia CTCM.
CTC owns and operates two broadcast networks:CTC and Domashny.
It’s the smallest company among Russia’s four major broadcast networks,
but it’s growing fast and set to get bigger. In June, CTC’s initial public offering
in the U.S. netted $105 million. The stock debuted at 14 and now trades near 23. The company’s second-quarter sales grew 83% from the prior year
to $102.8 million. Analysts polled by First Call expect CTC to earn 65
cents a share this year, with earnings increasing 35% and 27% in 2007 and 2008, respectively. “The financial returns they have been able to generate so far have been very good, and I think they’ll be able to continue that for at least
another couple of years,” said analyst Kevin Calabrese of Argus Research.
While Russia continues to grapple with various free-market growing
pains and economic problems, the country is increasingly comfortable
withWestern culture. “The broadcast market really feeds into that,” Calabrese said. CTC uses a lot of U.S. and European programming, with voices dubbed into Russian. It also has adopted a Western-style broadcast model.
“We have essentially taken triedand- true broadcasting techniques — in terms of program formats and broadcasting strategies — and imported them to Russia with great success,” Chief Executive AlexanderRodnyansky said during
asecond- quarter conference call. He and other company officials could not be reached for comment for this story. Soap Residue CTC, the larger of the company’s two networks, targets viewers from 6 to 54 years old. The network’s ratings advanced from third to second placeduring thesecondquarter, garnering a 14.7% share.
Growth was driven by the network’s original “Born Not Pretty” program, a 200-episode, soapopera- type series. The final episode aired in July.CTChas lined up new content to fill the spot, but the program’s departure could lead to a
slumpin market share. The smaller, Domashny network is aimed at female viewers and is available in 47 of Russia’s 52 major metropolitan markets. Its secondquarter market share was 1.3%, up a tadfrom last year.
In addition to the CTC and Domashny networks, CTC owns 17 local TV stations. The company reaches about 100 million viewers through 310 affiliate stations.


Ads Up National ad sales, handled by Russianadmarketer Video International
Group, generate nearly all CTC revenue. In July, regulators reduced the amount of broadcast ad time allowed per hour to 15% from 20%.
By the time the changes went into effect, Video International minimized
the impact of the change by renegotiating 85% of CTC’s contracts, increasing the price to reflect the reduced airtime allowance. Russian regulators have voiced concern that Video International has too strong a hold on broadcast
ad sales. The Federal Antimonopoly Service has threatened at various points to tighten regulation of Video International. While CTC faces stiff competition
from larger broadcast rivals, cable networks still pose little competitive
threat in part because most Russians still see television as a service that should be provided for free. That attitude will probably change over time, Calabrese says.