MCOT

MCOT Plc
In line with estimate: MCOT reported a Bt355m net profit for 1Q12, down 3% YoY but up 168% QoQ. The result was in line with our estimate. Ad revenue fell 3% short of our model (TV ad income was 4% lower and radio ad 2% lower than projected). GM was 53.4% (we assumed 56.8%). Gross profit missed our estimate by 5%; after-tax profit was 2% lower than expected.
Results highlights: The slight YoY net profit decline was because heavy OPEX outweighed the effect of a modest increase in total revenue and the headline corporate tax cut to 23%. The QoQ jump was driven by a post-flooding ad recovery and the corporate tax cut. The 24% YoY surge in service costs was attributable to programming, video wall equipment rentals, the leasing of a KU-band transponder and salary increases. Revenue from new media was Bt69m—up by 176% YoY and 21% QoQ—with the launch of four new satellite channels on C-band and the sub-leasing of Ku-band slots since 4Q11.  
TV ad revenue dipped 4% YoY, due to the ongoing effects of the 4Q11 flooding on 1Q12 TV ad revenue (the recovery didn’t gain traction until Feb). Note that the magnitude of MCOT’s TV revenue decline was greater than Nielsen’s estimate of a 1% YoY decline. The mean TV loading factor was 76% (against 95% in 1Q11 and 48% in 4Q11). Ad rates were raised, effective March 2012. Radio ad revenue posted a 2% YoY rise, underpinned by ad sales bundling across MCOT’s nationwide radio network of 53 provincial radio stations. 
Outlook: Management guides that 2Q12 TV ad revenue probably won’t rise YoY, due to the high 2Q11 base comparison. But the firm expects a QoQ increase on seasonality and pre-launch ads for the UEFA EURO soccer tournament. MCOT will revamp its TV programming in July. Management targets revenue growth of 15% in FY12, driven by non-prime and news programs, special events related to EURO 2012 and four marketing events, as well as higher new media revenue. MCOT will broadcast only three matches of the EURO tournament. 
What’s changed? We maintain our FY12 net profit forecast unchanged.
Recommendation: Our HOLD rating stands.