MCOT

MCOT Plc (MCOT)
Exceeded our estimate
MCOT reported a Bt480m net profit for 3Q12, up by 33% YoY and 8% QoQ. The reported number was 24% above our estimate, thanks to higher ad revenue and lower SG&A than modeled. Ad receipts were 7% above our expectation—TV ad revenue 8% higher and radio ad revenue 5% higher. SG&A was 9% below our model. GM was 57.2%; we had assumed only 55%.
Result highlights
The YoY jump in net profit was led by TV ad revenue (up by 24% YoY and 8% QoQ), a solid rise in radio ad receipts (up by 9% YoY and 4% QoQ) and well-controlled SG&A. There was no discernible low season effect in the quarter. The TV ad revenue rise was driven by a higher mean TV loading factor—92% in 3Q12 against 75% in 3Q11 and 90% in 2Q12—additional ad receipts from the Olympic Games and Miss Thailand live broadcasts. There were no ad rate increases in 3Q12. Ad revenue from news programs rose 45% YoY, while ad income from in-house shows shot up 192% YoY. The solid growth in radio ad revenue was driven by bundling marketing events with ad sales.
Outlook
Management expects another TV programming revamp in Jan 2013, given weak ratings for some variety shows. The rating for the Kui Kamong Khao Chao morning news program has picked up from 0.34 in 1H12 to 0.68 in October while that for the Kui Klook Wong Khao has just risen from 1.67 in 3Q12 to 2.13 in Oct. The firm guided for at least a 50% YoY jump in 4Q12 TV ad revenue. We estimate a Bt450m net profit for the quarter, up 240% YoY but down 6% QoQ.
The new president, Mr Anek Permwongseni, highlighted priorities—a higher proportion of in-house productions (from 46% in FY12 to 51% in FY13), the develop-ment of land plots into new sources of income, more special project income from SOEs (such as the Government Savings Bank), new business partnerships with BEC and TRUE Visions when their respective concessions expire and TV digital plans. MCOT will apply for facility and network licenses from the NBTC in Jan 2013 and will bid for five channel licenses in April 2013. 
What’s changed?
We have upgraded our net profit forecast by 6% to Bt1.73bn for FY12 and by 5% to Bt1.94bn for FY13 to factor in the stronger 3Q12 profit and better OPEX control than expected. Hence, our YE13 target price rises by 3% to Bt44.50.
Recommendation
Our BUY rating stands premised on value creation from digital network and channel provider licenses and improved operations in 4Q12 and beyond.