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Eros eyes NYSE premiere

RESULT: A promising second-half line up, plus a likely US listing next year, increases Eros's attraction
November 2, 2012

Take away unfavourable swings in currency exchange rates and six-month revenues at Eros International (EROS), a maker and distributor of Indian-language films, increased 4.4 per cent. Add in the company's commitment to listing on the New York Stock Exchange, likely to happen early next year, and the unloved Bollywood film producer is worthy of a favourable review.

IC TIP: Buy at 195p

True, underlying operating profit on a constant currency basis declined a third to $19.1m (£11.9m). However, Eros expects that performance to improve in the second half, a time when it traditionally banks more revenue. The company scored a big film hit with Housefull 2, grossing around $27.4m, and is looking to diversify its revenue base through TV syndication deals and digital content. Eros has struck a TV syndication deal with Viacom 18 and signed further TV licensing deals with Zee TV and Star TV. ErosNow, a recently-launched on-demand entertainment portal accessible from Apple iPads, is soon to be made available on Android devices.

Attempts to crack the international markets, however, have only been moderately successful. India still accounts for around three-quarters of sales and is the company's strongest-growing market. By contrast, Europe and North America each only account for $5m of revenue.

Broker Investec, anticipating a sales boost from a strong line up of theatrical releases in the second half - plus growing digital revenues - forecasts full-year adjusted pre-tax profits of $69.5m, up from $64.9m the year before.

EROS INTERNATIONAL (EROS)

ORD PRICE:195pMARKET VALUE:£242m
TOUCH:192-197p12-MONTH HIGH:310pLOW: 173p
DIVIDEND YIELD:nilPE RATIO:10
NET ASSET VALUE:362¢*NET DEBT:31%

Half-year to 30 SepTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
201192.029.018.6nil
201286.412.47.00nil
% change-6-57-62-

*Includes intangible assets of $525m, or 423¢ a share £1=$1.61