BEC World

BEC World Plc (BEC)

Investment thesis
BEC’s share price recently dropped on concerns that competition for ad spend will intensify with the advent of digital TV. While that is a long-term risk, free-to-air digital TV won’t launch till 2015, so ensconced operators have two years of good numbers to look forward to. As such, we have upgraded our rating from HOLD to TRADING BUY. 
Expect firm to post healthy 1Q13 net profit expansion
We estimate a Bt1.33bn net profit for 1Q13, up by 20% YoY and 15% QoQ. The YoY jump is attributable to greater ad revenue, well-controlled OPEX and the headline corporate tax cut to 20%. The expected QoQ rise would have been led by seasonally lower SG&A. Ad revenue should post increases of 12% YoY and 2% QoQ, supported by mean ad rate hikes of 15% for 30 shows, effective Jan, higher ad rates for some shows in FY12—Khao Sam Miti in March 2012, Rueng Lao Sao Arthit in July 2012—and the re-claiming of Thai soap opera re-run minutes in 2Q12. Our ad revenue growth estimate is close to Nielsen’s 11% YoY projection for 1Q13. 
Revenue from concerts and shows will post a 21% YoY rise (but a 33% QoQ dive), led by two concerts—Luna Sea Live 2012-2013 and Santana—and one event—Disney on Ice Princesses and Heroes. GM should be about 54.6%, close to the 1Q12 number.
Non-prime ad rate increase effective May 2013
BEC announced that it has revamped its non-prime shows for the hours 13.00-16.00 and increased ad rates. For Monday-Friday 13.40-14.10 slots, the firm will launch a new food variety show—Krua Khun Toy—in place of a Chinese series, effective May 2013, and increase the ad rate for the slot from Bt120K/min to Bt200K/min.
We believe that the move was a response to Channel 7’s ad rate increases for five non-prime shows in 2Q13—Big Cinema (up 13%), Mon-Friday Thai drama re-runs (up 13%), Z-Zone (up 33%), Disney Club (up 15%) and Weekend Cartoons (up 36%). Moreover, Channel 7 has increased its ad rates for early prime news slot (17.00-18.00) by 25% and evening Thai soap opera slots (18.00-18.30) by 16%.  
FY13-14 net profit forecast upgraded by 1-1.5%
BEC’s ad rate increases for 13.40-14.10 non-prime slots are likely to boost annual revenue by Bt115m—rises of 1% for consolidated revenue and 1.5% for consolidated net profit. As such, we have revised up our top-line forecast by 0.5% for FY13 and 1% for FY14. Hence, our net profit forecasts rise by 0.8% for FY13 and 1.4% for FY14, pushing up our DCF-derived target price from Bt68 to Bt69.