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A Russian Media Firm That May Actually Help Your Portfolio

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (MagicDiligence) -- The easiest way to think about CTC Media (CTCM) is as "the Russian CBS (CBS)." While many understandably flinch at the idea of investing in such a volatile country as Russia, CTC looks like a well-run, conservative outfit. This broadcast network is debt-free (pretty remarkable for a media company) and has nearly $130 million in cash on the balance sheet. Operating margins and cash flow generation have been steady over the past 5 years, even in the 2008-09 period. Share dilution has been minimal.

Of particular interest is the firm's recent payment of dividends. While there seems to be no consistent policy (it has been quarter-to-quarter), there have now been 6 consecutive quarterly dividends. The stated dividend intention of $130 million for fiscal 2010 represents a roughly 8.7% yield on the current market cap of $1.5 billion.

That's a significant payout on top of what is also a value story. CTC's MFI earnings yield is 17% (P/E ratio is 9.1), extremely low for a 20% grower in a long-tail growth market. The stock's current price of $9.50 or so is right near the 52-week low. By comparison, the 52-week high is $25, a 178% gap! At current valuations, CTC seems to have a lot of upside with limited downside and a large dividend yield for protection.

CTC operates 3 networks: CTC, the largest under its umbrella, is currently the No. 4 TV station in Russia, reaching 94% of Russian households and carrying an 11% audience share in its target 6-54 demographic. Domashny, launched in 2005, is a network targeting 25-60 year old female viewers (a desirable advertising demographic), reaching 82% of households with a 3% share. Finally there is DTV, acquired in 2008 and targeting 25-54 year old viewers, reaching 73% of households and holding a 2% audience share.

CTC also has a number of other businesses, including smaller networks in Kazakhstan and Moldova, a YouTube-clone called Videomore.ru, content production studios and a number of company-owned regional stations. The majority of broadcast stations are independently owned and operated affiliates. Virtually all of the company's revenue is from traditional, free over-the-air advertising.

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