TV - FTA

TV - FTA
At current prices, BEC and MCOT should be more resilient to
increasing market volatility, thanks to their: 1) mass-media
propositions; 2) high ROEs, stable FCFs and generous dividends; and 3)
undemanding 3-year average P/E valuations.
After our meetings with NBTC and
MCOT, we remain Neutral on the
FTA TV sector due to: 1) softer
domestic spending expected in 2H13
that is likely to offset a decent 2Q13;
and 2) the uncertain long-term
profitability of FTA TV providers due
to terrestrial TV’s conversion from
analogue to digital. Our top pick is
MCOT whose DTTV network has
been undervalued by investors, in our
view. We are Neutral on BEC.
What Happened
We met a senior employee at the
National Broadcasting and
Telecommunications Commission
(NBTC) and an investor relations
officer at MCOT for updates on the
TV industry.
The NBTC has a tight 6-month
window (Jul-Dec 13) in which to
award several licences to: 1) TV tower
operators; 2) TV network operators; 3)
public TV channel operators; and 4)
commercial TV channel operators.
Analogue terrestrial TV (ATTV)
broadcasters - BEC and MCOT -
continue to strengthen their
programme line-ups with
high-quality content such as the
English Premier League (EPL). Based
on Nielsen’s latest statistics, we think
BEC and MCOT will report decent
earnings growth in 2Q13.
What We Think
We believe BEC will emerge a winner
from the NBTC’s licensing in the
sector as it has gained market share
in terms of audience and advertising
revenue. While MCOT will need more
time to strengthen its line-up, we
think investors have underestimated
the incremental value of its new
digital terrestrial TV (DTTV)
infrastructure and network licences.
Free-to-air (FTA) satellite TV
operators could be losers in the sector
due to their lack of traction with
advertisers.
What You Should Do
Investors should buy our top pick,
MCOT (Outperform, TP: THB60) as
we think its DTTV network business
has been undervalued. We have a
positive outlook for FY14-15 TV adex
and prefer ATTV operators BEC and
MCOT to FTA satellite TV operators
Grammy, RS and Work, given the
ATTV operators’ resilience to lower
domestic consumption expected in
2H13.