VGI Global Media

VGI Global Media Plc (VGI)

Beat our estimate
VGI posted a 4Q12/13 net profit of B224m, down 17% QoQ but up 554% YoY. The result was 7% below than our estimate, due to lower-than-expected GM. The top-line and SG&A were in line with our numbers. The firm also announced a cash dividend of Bt1.4/share and a stock dividend at a ratio of 10:1 (XD on May 28; payout on July 17).
Results highlights
VGI posted explosive YoY core profit growth for 4Q12/13 of 554%, powered by top-line and GM expansion. Advertising receipts from the mass transit system jumped 51% YoY to Bt360m on an additional 12 trains (during April 2011). In-store billings jumped 62% YoY to Bt299m from the low base set by the post-4Q11 flooding period and additional advertising management contracts for the sales floors of BICG Extra and Tesco lotus. Revenue from advertising space in office buildings and other media dived 77% YoY to Bt11m with the maintenance shutdown of an LED screen at Pratunam intersection and lower ad bookings for an LED screen near Rama IV intersection, due to bridge maintenance.
On a QoQ basis, advertising receipts declined across all media categories on low season—transit media billings dropped by 6%, in-store media billings by 10% and other media billings by 76%. GM related to business with BTS was flat QoQ at 82%. Modern trade GM slimmed down to 21% from 26% in 2Q12/13 and office building media GM slipped to 63% from 74% the previous quarter. The SG&A-to-sales ratio declined 230 bps YoY but increased 20 bps QoQ to 13.8%.
Outlook
We anticipate that earnings will post QoQ growth through 1Q13/14-3Q13/14. In-store media billings will drive revenue expansion in 1Q13/14. 2Q13/14 earnings growth will be led by a jump in transit media receipts, as 35 new bogies will start operating during the quarter. Profit will peak in 3Q13/14 on high season. 4Q13/14 transit billings may possibly increase with the replacement of illuminated posters on platform trusses with LED screens. We model for earnings growth of 54% for FY13/14.
What’s changed?
We have trimmed our FY13/14 profit forecast by 5% to reflect lower expectations for screen revenue. As such, our end-March 2014 target price falls to Bt149. Note that the firm will host an analyst meeting on May 17.
Recommendation
VGI currently trades at an FY13/14 PER of 31x, equal to FY13/14 PEG of 0.6x, only slightly below the 0.7x mean of the Media stocks under BLS coverage. But trading sentiment is good—the market anticipates that the stock will be added to the SET100 Index in July (its 3-month average market cap is very close to that of MCOT). In that case, it would be on the radar of major local institutional funds. Our BUY rating stands.