Bec World

Bec World Plc (BEC)

Q2 2013’s profit to grow 19%yoy from advertising rate hike and
program reshuffle

BEC revealed advertising spending of Channel 3 in April growing 12%yoy, in
line with the advertising spending growth reported by Nielsen Media Research
at 11.9%yoy, which was more than the overall advertising spending growth of
only 3.8yoy. The management said as the advertising spending in April 2012
was substantially high from broadcasting of the European Football
Championship, the advertising spending in 2Q13 would grow less than in April
2013. Accordingly, we project the advertising spending in 2Q13 of BEC to
grow 9%yoy due mainly to the advertising rate hike at the beginning of the
year and new seasonal reality shows broadcasted in 2Q13, such as Miss
Country Girl, The Voice Kids, and Thailand’s Got Talent Season 3, as well as a
new TV program, Krua Khun Toi, which has an advertising rate of
B200,000/minute and gave a 20% discount since its first broadcast in May
2013 as a replacement of the cancelled afternoon Chinese drama series “Tam
Nan Rak Dok Mei”. At the same time, gross margin moved up from 52.5% in
2Q12 to 56.5%, while SG&A/sales is projected to drop from 11.5% in 2Q12 to
11%. Consequently, it is projected that 2Q13’s net profit would make a new
high at B1,483m, escalating 19.2%yoy and 7.4%qoq on seasonal benefits.
- Advertising rate hike early this year will maintain FY profit growth at 20%
As a TV station with the largest audience base in Bangkok and vicinity,
combined with its continuously developing of new programs to increase the
income base, including drama series, news, and seasonal programs during
weekend, the profit base tends to grow constantly. FY2013’s net profit growth
is estimated at 20%. An approach of 24 digital TV channel biddings in August
– September this year, however, will fuel up competitions among TV business
and make advertising rate hike harder than in the present. Nevertheless, with
its readiness in terms of the audience base and the strength of content and
the capital, we believe BEC will win biddings for 3 digital TV channels, which
include an HD channel that will be used in broadcasting as a replacement of
the current analog system, a variety channel, and a children channel.
Increasing capacity from these 3 new channels will compensate for the harder
advertising rate hike as a result of the fiercer competition in the future, so
BEC’s profit would still be able to grow continuously after the official
commencement of the digital TV business.
- Upside is 20%; dividend yield is 4.3%. Upgrade to BUY.
The share price has previously declined until it shows 20% upside from 2013’s
fair value, using DCF, at B78/share. FY2013’s dividend yield can be expected
high at 4.3%, while earnings tend to improve during the rest of the year.
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