Media Sector

·         Worse-than-expected flooding prompted us to cut ad spending growth to 6-7% in 2011F (from 10-12%) and to 5-6% in 2012F (from 8-10%)

·         Loading should fall and planned ad rate hikes could be delayed to mid-2012

·         BEC should be less affected than MCOT, as the former is gaining market share with popular dramas and news coverage on the floods

·         Maintain BUY for BEC, but downgrade MCOT to HOLD

Weak ad spending until 2Q12. Given the European debts crisis and the start of flooding in Thailand, overall ad spending growth decelerated to 5.8% in Sep 2011, much lower than the 11% registered in 8M11. And with the floods worse than most expectations, ad spending will be much weaker over 4Q11-1Q12.

Delaying ad rate hikes. The market had earlier expected BEC’s Ch3 to raise ad rates in October and MCOT to raise rates in selected programs in 4Q11. But given the weakening purchasing power and consumer confidence following the global slowdown and flooding, there are unlikely to be any rate hikes until mid-2012.

Maintain BUY call for BEC: Given its popular dramas and good news coverage of the flood crisis in Thailand, BEC should see the least impact from the floods. Coupled with quality management, BEC’s profitability should recover before peers. We reiterate our BUY rating for BEC with a revised target price of Bt42.00, based on 20x FY12F PE.

Downgrade MCOT to HOLD: Given its weak ratings, regulatory uncertainty, and absence of a share price catalyst, we downgrade MCOT to HOLD with revised target price of Bt24.75, pegged to 10x FY12F PE.