BEC World

BEC World Plc (BEC)

Investment thesis
Following the analyst meeting, we reiterate our view that the launch of digital TV (in 2H14 or 2015) won’t squeeze BEC’s earnings for at least several years. In the meantime, the firm will enjoy strong profitability in the absence of competition from digital TV. Our TRADING BUY stands, premised on solid FY13 earnings growth and a dividend yield of 4%.
1Q13 net profit slightly above estimate—another record
BEC reported a 1Q13 net profit of Bt1.38bn, up by 25% YoY and 19% QoQ and a new record. The result was 4% above our estimate, thanks to lower-than-modeled OPEX. Service costs were 3% lower than expected and SG&A was 7% lower. Ad revenue was in line with our model. GM was 56.1% (we had assumed 54.6%). The YoY rise was led by ad income, better OPEX control and the corporate tax cut to 20%. The QoQ increase was due to seasonally lower SG&A. Ad revenue grew by 12% YoY and 2% QoQ. Income from concerts and shows jumped 20% YoY but dived 33% QoQ. Equity income from Forever Bec-Tero Ltd, an affiliate in Myanmar, was Bt13m in 1Q13.
Solid ad revenue expected in 2Q13
The firm guides for April ad revenue growth of 12-13% YoY, but receipts for June are likely to post only an insignificant YoY rise, due to the high base set by June 2012 related to the Euro soccer tournament. Four new shows will air in 2Q13: 1) Miss Country Girl (20 April-13 July), 2) The Voice Kids (27 April-22 June), 3) Krua Khun Toy (May 2) which will replace free ad slot re-runs with a Bt200K/min ad rate and 4) Thailand’s Got Talent Season 3 (in June).
BEC will consider discontinuing another two slots of free ad re-runs—after midnight and 2-3pm. It might also increase ad rates for two Thai soap slots—5.45-6.45pm and 6.45-8.00pm. We forecast 2Q13 ad revenue of Bt3.8bn, up by 8% YoY and 7% QoQ.
To bid for digital channel licenses
Management said during analyst meeting that BEC will bid for digital channel licenses, but didn’t say which types of channels, claiming that would depend on NBTC regulations. The firm anticipates that a digital service launch might be possible by mid FY14. BEC claims that its studios are already digital-compliant, so the required investment for a digital equipment upgrade would be minimal.
Upgrade to FY13 net profit by 3%
We have upgraded our FY13 profit forecast by 3% to Bt6bn to factor in greater 1Q13 earnings than estimated and better OPEX control. Hence, our DCF-derived YE13 target price rises 5% to Bt73.