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July 30, 2015

Dear Partners,
Please find your quarterly statement attached. Coho Capital lost 0.61% during the second quarter and
returned 3.58% through the first half of the year. This compares to an increase for the S&P 500 of
0.28% during the quarter and 1.23% for the first half of the year.
We made two purchases during the first half of the year, which we detail below:
Videocon d2h (VDTH)
Videocon d2h is a satellite television provider in India. The Indian PayTV market is the fastest
growing in the world and VDTH is the fastest growing PayTV provider in India with a 20% market
Satellite TV is an attractive business model with recurring revenue streams, significant operating
leverage and recession resistant economics. It is also a market that naturally lends itself to
oligopolistic structures as growing economies of scale provide substantial barriers to entry for new
Videocon went public as a result of a transaction with Silver Eagle, a Special Purpose Acquisition
Company (SPAC), which acquired a 38% stake in VDTH. Remaining shares in VDTH are owned by
Videocon Group, a family conglomerate with interests in oil and gas, retail and consumer electronics.
Silver Eagle was started by two highly respected media executives, Harry Sloan and Jeff Saganasky.
Between them, Mr. Sloan and Mr. Saganasky have run more than a half dozen entertainment
companies and movie studios including TriStar Pictures, MGM, Sony Pictures, and CBS
Entertainment. Both Mr. Sloan and Mr. Saganasky have an impressive record for value creation. Mr.
Sloan started SBS Broadcasting with an initial investment of $5M and grew it into Europes second
largest broadcaster, reaching 100 million people in nine countries and helping to pioneer the model
for PayTV along the way. SBS was sold to KKR in 2005 for $2.5 billion dollars. Mr. Sloan saw
similar success with New World Entertainment, purchasing the company for $2M in 1983, leading
the company through multiple acquisitions, including Marvel Entertainment, before selling the
business for $260M less than six years after launch. Mr. Sloans studio experience also includes
stints as CEO of MGM Studios and Chairman of Lionsgate Films.
For his part, Mr. Saganasky lifted CBS television ratings from worst to first and grew network cash
flow at a 25% annual clip while serving as President of the unit for five years. Apart from CBS, Mr.
Saganasky also served as head of programming at NBC where he developed Miami Vice and Cheers.
Mr. Saganasky has studio leadership experience as well having served as Co-President for Sony
Pictures, where he acquired Telemundo and then sold it three years later for six times Sonys

investment. While at Sony he also presided over the merger of one of the worlds largest movie
theater companies in combining Loews with Cineplex Odeon.
Sloan and Saganasky will be serving on the board of directors at Videocon. One could argue that
their lack of experience in the Indian market makes their background less relevant, but both
executives have a record of producing stellar results. In addition, their familiarity with content
providers and media negotiations should yield useful insights as Videocon scales.
Indias TV Market Offers Tantalizing Growth
India is an attractive market with a long runway for growth. With an average age of 26 and a
population of 1.3 billion people the potential opportunities are vast. Prime Minister Narenda Modi,
elected in May of 2014, has set about reducing bureaucracy and opening up Indias economy to make
it more business friendly. The reforms are having their desired effect with Indias economy on pace
to grow 7.5% this year and over 8% next year.
At 168 million TV households, India has the second largest TV market in the world behind China.
However, household TV penetration is low at 61% compared to other developing markets, such as
China at 97%, Vietnam at 86% and the Philippines at 83%.
Historically, the Indian PayTV industry has been highly fragmented with tens of thousands of local
operators selling pay TV service to connect to cable company networks. Increased modernization of
Indias media infrastructure has flipped this dynamic with the growing scale of larger players
resulting in a more orderly marketplace where brand cachet carries more value.
Rising incomes and increased leisure time should spur demand for home-based media and
entertainment consumption. According to KPMG, the Indian TV market is expected to grow at a 16%
compound annual growth rate between 2015-19.
We think VDTH represents a play on Indias growing middle class and believe the company will pay
a key role in the modernization of the countrys media infrastructure. The company is currently the
second largest satellite TV provider in India behind Dish India. VDTHs marketing efforts have
focused on localizing programming options as a distinct offering from packages offered by foreign
owned DISH. The approach appears to be paying off with VDTH growing its market share from 11%
three years ago to 20% today. In contrast, Dish India has seen its share of the market slip from 28%
three years ago to 27% today. VDTH continues to narrow the gap capturing 26% of satellite
subscriber additions during the first half of 2015.
Well-Positioned to Capture Additional Market Share
VDTH has a compelling program offering with the greatest number of overall channels across every
conceivable package option including sports, premium and regional channels. VDTH also offers 37
HD channels as well as a suite of education focused services for children and a multi-channel music

offering. Despite more channels, VDTH offers attractive price points with some of the industrys best
pricing. The company has a history of innovation in content curation and delivery with many popular
channels debuting on VDTH including National Geographic, Discovery and ESPN.
One of the reasons VDTH has been so successful in capturing market share has been Videocon
Groups network of consumer electronics chain stores. Consumers can enter the store, arrange for
new service and schedule installation the same day.
In aggregate, VDTH has 200,000 distributors and is the only PayTV operator with its own service
centers. VDTHs service record would make US cable customers envious with installations taking
less than four hours for 97% of VDTHs customers. VDTH keeps things running smoothly with
6,700 customer support staff, including 2,500 engineers and 24/7 call centers featuring nine regional
languages in addition to Hindi and English.
Customers tend to be happy with the service, with monthly churn rates of only 0.46% compared to
.70% for Dish TV India. As a point of reference, DirecTV has a churn rate of 1.35% in the US.
Lower churn rates are critical as they increase the lifetime value of a customer.
Given the patchwork nature of Indias PayTV infrastructure, VDTH recognized early that a strong
reputation for quality customer service would put the company in good stead. And indeed it has with
a recent brand audit by KPMG naming Videocon as one of Asias most promising brands. Indias
The Economic Times, the most widely read business newspaper worldwide after the Wall Street
Journal, named Videocon as one of the best brands in 2013 and 2014 and Asias Most Promising
DTH (direct to home) Brand.
Videocons premier brand and reputation for quality customer service should enable the company to
continue to gain share from competitors.
Built-in Catalyst with Government Mandated Transition to Digital TV
Even absent additional share gains VDTH should still manage to grow its subscriber base rapidly due
to the Indian governments mandated transition to digital cable television under its Digital Access
Service (DAS) initiative. Phase I and II of DAS occurred in 2013 and 2014 and phases III and IV are
scheduled to be completed by December 2015 and December 2016 respectively. Phases III and IV
will feature rural geographies where VDTH is favorably poised due to its vast rural distribution
network and greater selection of local content preferences. Speaking to the governments
digitalization drive, CEO Anil Khera noted the growth opportunities for VDTH, We believe that 90100 million homes will be making the switch to digital platforms. We are well positioned to benefit
from this and we believe we will take the largest share of this opportunity, as we have in the past.
Parsing out the numbers for the government mandated digitalization drive opportunity suggests
VDTH can double its number of subscribers just from the digitalization initiative alone. The areas of
focus for Phase III and IV contain 70 million homes where satellite providers have an 80% market

share of the homes that have already switched to digital TV. If satellite providers maintain their share
in the transition to digital and VDTH continues to capture 20% of new satellite subscribers then the
company should be able to grow its subscriber base by 11 million. This would be a doubling of
VDTHs current subscriber base of 10.6 million and give the company approximately 22 million
subscribers, a larger total than DirecTVs 20 million subscribers in the US. We think these numbers
are likely conservative as VDTHs share of gross satellite subscriber additions continues to grow and
averaged 26% for the first half of 2015.
Significant Opportunities for Margin Expansion
The satellite business is characterized by inherent operating leverage with a largely fixed cost base
able to serve more subscribers with minimal variable costs. This is reflected in VDTHs fixed costs
as a percentage of operating revenue falling from 22.5% in 2013 to 17.2% in 2015.
An increased subscriber base also results in lower fixed costs if content fees are fixed fees rather than
per subscriber. Even on a per subscriber basis, content costs are lower with a larger subscriber base
resulting in increased negotiating leverage with content providers. In VDTHs case, half of its
programming fees are fixed costs with the other half assessed fees on a per subscriber basis. VDTHs
content costs have fallen from 40.4% as a percentage of revenue in 2013 to 37.0% today despite
expansive growth in its channel line-up and increased carriage of premium and branded channel
content. Videocon renewed all key content contracts for an average length of three years in 2015
ensuring that 95% of content costs are locked in through 2018.
As VDTHs subscriber numbers continue to scale, operating leverage will result in higher margins.
Results of recent years have demonstrated this trend with EBITDA margin growing from 7% in 2013
to 28.7% today.
Rising Average Revenue Per User, or ARPU, represents another source of margin expansion. Indias
DTH industrys ARPU lags far behind not only mature markets but other developing markets as well.
The average ARPU in India is $4 per month compared to $98 in the U.S. and $12-$14 in developing
markets across Asia. One way to think about ARPU is to use movie ticket prices as a benchmark.
The ARPU of satellite subscribers in the U.S. is roughly 12x the average movie ticket price. This
compares to a 1x ratio for Indian satellite TV subscribers suggesting there is significant leeway to
raise pricing. Our interest is piqued when we discover businesses with latent pricing power.
Consolidation within the satellite TV market should be a key source of ARPU growth. At present,
there are six satellite TV providers within India, compared to a typical industry structure of two
providers in most other markets. The pace of consolidation has quickened in recent years with VDTH
rapidly gaining share. The economies of scale enjoyed by VDTH and Dish India will make it
increasingly difficult for peripheral players to compete, eventually paving the way for a duopoly or
oligopolistic industry structure. Once the market consolidates there will be substantial opportunity to
raise prices.

The migration to high definition (HD) programming from standard definition (SD) will also increase
ARPU with the average ARPU of HD subscribers 2.5x that of SD subscribers. At present, only 10%
of VDTHs subscribers are HD but 30% of new customers select HD programming.
High Margin Advertising is an Untapped Opportunity
Increased advertising revenue presents another source of upside for VDTH. At present, Indian
broadcasters control the entire inventory of TV advertising. As the market for PayTV grows, India
should migrate toward the standard in other developed markets in which PayTV operators with scale
are able to negotiate ad inventory for themselves in exchange for favorable channel placement. There
is also the opportunity to develop original content in which VDTH would own the ad inventory.
VDTH recently launched an initiative to jumpstart ad revenues by commissioning a team of
advertising sales professionals to sell ad inventory on proprietary channels. Recent channel additions,
including an HD movie channel, a music channel, and a kids learning channel, should further increase
potential ad inventory. VDTH has also started selling ads on its channel guide. While management
has not yet put numbers to the anticipated growth in advertising revenue they have stated they expect
growth to be exponential.
Deceptively Cheap
VDTH is deceptively cheap. The company trades for an EV/EBITDA of 10x based upon our
estimates for 2015. This is a fine price to pay for one of the best business models we know of in the
early stages of explosive growth. As a point of reference, VDTHs main competitor in India, Dish
TV India, trades for 13x EV/EBITDA. As VDTH continues to take share from Dish TV India we
expect the company to fetch a comparable multiple.
Where things really get interesting is looking out two to three years in the future. We expect
EBITDA growth of 30-50% a year over the next couple of years using past levels of subscriber
additions, increased operating leverage and a 10% annual rise in ARPU. On our 2016 numbers,
VDTH trades at an EV/EBITDA of 7x. Using a more appropriate multiple of 14x EV/EBITDA
results in a double from current levels.
There is a lot of embedded optionality in VDTHs growth prospects with the Indian governments
digitalization initiative (DAS) as well as high margin advertising revenue likely to be material to the
companys revenue growth. Looking at the level of potential subscriber additions from DAS, a 2-3x
return in the shares is a reasonable outcome over the next two to three years. Even absent higher
multiples, shareholders should be well served for years to come due to the compounding of profits.
Why is it Cheap?
VDTH is cheap for a number of reasons, all of which are transitory. Typical SPAC dynamics have
held down shares as event focused investors have sold shares post announcement. VDTH only began

trading in April and the company has scant Wall Street coverage with only one analyst covering the
company. In addition, because VDTH was not brought public through a typical IPO route with its
attendant road show, it has had little opportunity to get in front of investors. We trust that as
Videocon continues to post impressive growth and investors familiarize themselves with the attractive
economics of the satellite business, demand for shares will respond in kind.
The opportunity to own a Dish or DirecTV early in its lifecycle offers significant opportunity for
compounding capital. While market operating dynamics are vastly different between India and the
US, consider that DirecTV trades for an enterprise value of $62 billion dollars for 35 million
subscribers (with 43% of subscribers in Latin America) while VDTH trades at an enterprise value of
$1.56 billion dollars with 11 million customers.
Viad (VVI)
At Coho, we are always looking for informational inefficiencies. One of the areas in which we have
found success is analyzing businesses with multiple operating units. On occasion, such businesses
possess a high quality enterprise obscured by the dominant business unit. Such is the case with Viad,
a company primarily known for its trade show exhibition management business but with a jewel of a
travel and recreation business.
Viad Tradeshow Business, Oligopoly with Sticky Customer Relationships
Lets start with the exhibition management business, Global Experience Specialists, or (GES), which
generates 89% of Viads revenues. GES focuses on trade show management and exhibitor services
including planning, installation, kiosk and exhibit design, audio and video and on-site management.
GES is the leading exhibition provider In Canada and the UK and the second largest provider in the
There are a number of things we like about the GES business. It operates within a duopolistic market
structure. Viad and its primary competitor, Freeman, control 80% of industry profits in the US with
Viad maintaining a 30% market share. In Canada, Viad accounts for nearly half of all dollars
allocated to exhibition construction and management and in the UK Viad dominates with a 55%
market share.
Its a scale business with leading players having best in class local operations that are hard for new
entrants to create from scratch, creating barriers to entry. Viads customer base is highly fragmented
with no customer accounting for more than 6% of GES revenue. Contracts are typically for 3-5
years creating recurring revenue streams.
Last, and probably most important, there is a switching cost for customers wishing to hire new
providers. This explains why Viad has a client retention rate of over 90%.

Viad Travel and Recreation, Unique Assets with Few Substitutes

The Viad Travel and Recreation business, known as VTR, sells travel and leisure experiences at four
well-known national park destinations in North America, including Glacier and Denali National
Parks in the US and Banff and Jasper National Parks in Canada. The parks benefit from perennial
demand with current annual visits of over eight million. A rise in global wealth has led to a surge in
international tourism, driving strong demand for park facilities.
VTR generates revenue through providing transportation, lodging, package tours, and creating unique
While VTR only accounts for a tenth of Viads revenue it generates 40% of profits due to its lush
margins. The VTR business is highly profitable, sporting an EBITDA margin of 30.2% last year
compared to 5.7% in GES. Not only is the business highly profitable but growth has been explosive
with a CAGR of 15% over the past five years.
VTRs lodging business is a steady generator of revenue in supply constrained markets but VTRs
crown jewel is its attractions business. VTRs attractions offer unique experiences you cant get
anywhere else such as a tour of the Athabasca Glacier on vehicles designed specifically for glacier
travel or Jasper Parks Glacier Skywalk, a cliff edged walkway allowing you to step into the void
with nothing but a sheet of glass between you and gravity.
The economics of VTRs attractions business are extremely compelling. The Skywalk cost $20
million to build but generated $5.5 million dollars in its first year of operations and possesses 60%
operating margins.
Viads VTR business possesses unique assets with few substitutes, limited supply and barriers to
entry through government permits. One way to think about this business is similar to the casino
business in Macau, though much more wholesome. Similar to Macau, where the government limits
the licenses to operate casinos, the Canadian and US Park Services are very restrictive in terms of
new builds. It is virtually impossible to build new inventory within the parks and even building
outside of the parks is heavily restricted. As a result, Viad is able to earn abnormal economic returns.
Tradeshow Business for Below Market Multiple with Recreation Business for Free
Its clear that Viads business structure obscures the value of its VTR assets. Given the lack of
synergies between Viads two business units it does not make sense to keep the two businesses
attached at the hip. The sensible course of action would be to separate the two businesses into
independent operating entities where they would be worth almost double their current market

Management has guided its exhibitions business to over $1 billion in revenue and $80 million in
EBITDA by 2016. Given the stability of Viads market position and recurring cash flows, we think
8x EV/EBITDA is appropriate, especially given a growing sales contribution from high margin
complementary services. Recent acquisition multiples within the exhibitions space have been in the
region of 10x EBITDA so we think our estimates of value are conservative.
Based on Viads guidance for its exhibition business in 2016, Viad trades for an EV/EBITDA
multiple of 7.6x. This implies you are getting Viads travel and recreation business for free.
So what would Viads travel business be worth to a buyer? For valuation guidance we can look
toward other mountain recreation specialists such as Intrawest Holdings and Vail Resorts which both
trade at a 14x EV/EBITDA multiple. Due to their reliance on skiing both Vail and Intrawest have to
pray to the snow Gods to earn economic returns, whereas Viad just needs summer to arrive each year,
fair weather or not.
If we want to consider attractions as a comp, we can look at amusement park operators Six Flags or
Cedar Fun which trade at an average EV/EBITDA multiple of 14.3x. Like Viad, both Six Flags and
Cedar Fun have unique assets with limited supply and a captive audience.
The comps I have mentioned have greater scale in their operations so we discount Viads multiple by
15% for what we think is an appropriate metric of 12x EV/EBITDA. We have already included debt
in our EV/EBITDA calculation for the exhibitions business so we dont have to count it twice. With
a 12x EV/EBITDA multiple, Viads travel business is worth $480M. Since we are getting it for free
we can add it to Viads existing market cap suggesting upside of 95%.
We felt strongly enough about Viads prospects to present the idea at Fairfax Financials annual
meeting in Toronto earlier this year.
Both VDTH and VVI are emblematic of the kinds of businesses we endeavor to own at Coho
durable, free cash flow generative, with predictable revenue streams and defensible market positions.
VVI, while more cyclical than VDTH, offers strong downside support in the form of asset value.
Both companies possess talented management teams and have multiple paths toward unlocking value.
Normally these types of companies are priced dear but recent transactions (SPAC IPO for VDTH)
and the transactions not taken (a sale of the exhibition management or recreation business for VVI)
have resulted in inefficient pricing. With increased analyst coverage and the opportunity for the
economics of these businesses to shine through we expect price discovery to result in higher
Respectfully yours,
Jake Rosser
Managing Partner
Coho Capital Management