GMM Grammy
Core loss, in line with estimate HOLD (maintained) Target price: Bt19.50 Price (28/02/12): Bt18.80
Grammy Plc
Core loss: GRAMMY reported a Bt22m net profit for 4Q11, down by 88% YoY and QoQ. Stripping out a Bt33m gain from an asset sale, the firm would have posted a core loss of Bt10m (against core earnings of Bt189m in 4Q10 and Bt180m in 3Q11). The reported 4Q11 net profit exceeded our estimate, due to the one-off gain. The core loss was in line with our model. GRAMMY won’t pay a dividend for 2H11 operations.
Results highlights: 4Q11 was the first quarter since 4Q06 in which the firm had posted EBIT (or rather LBIT) in red ink. LBITDA for the period was Bt3m. All business units except satellite TV reported YoY declines in revenue as a result of the flooding. Event-organizing revenue saw the steepest fall of 38% YoY, followed by TV (down 35% YoY), showbiz (down 29%), radio (down 17%), publishing (down 15%), movies (down 15%) and music and digital (down 11%). In contrast, satellite TV income jumped 66% YoY, but from a small base.
A range of concerts, musical plays and events were cancelled or rescheduled to 1Q12. New album releases fell 13% YoY, while CD sales dropped 11% YoY. Only one concert and one musical play showed in 4Q11 and their durations were cut short by the inundation. The movie Top Secret grossed only Bt35m at the box office. Media operations—radio, publishing and TV—posted lower ad revenues as major advertisers slashed spend. The satellite TV revenue increase was led by the launch of 1-Sky set-top boxes in Nov and higher satellite TV ad income.
Outlook: All business units will start recovering in 1Q12 and operations will normalize in 2Q12, according to management. There could be upside to media revenue, as GRAMMY has exclusive Thailand rights to broadcast the 2012 European soccer competition (UEFA Euro 2012), which will start in June. The firm anticipates that it will sell 1.5m set-top boxes for its 1-Sky satellite TV platform this year. GRAMMY targets FY12 top-line growth of 15-20% YoY.
What’s changed? We have upgraded our FY12 net profit forecast by 6% to factor in expanded expectations for revenues. As such, our YE12 target price rises by 8% to Bt19.50.
Recommendation: Our HOLD rating stands, premised on a fully-stretched valuation.
