MCOT
In line with our model
MCOT Plc
In line with our estimate
MCOT reported a Bt445m net profit for 2Q13, flattish YoY but up 19% QoQ. The result was in line with our estimate. Total ad receipts were 3% below our model (TV ad income was 5% lower, but radio ad income was 5% higher). In a positive surprise, concession revenue exceeded our estimate by 17%. Gross profit was in line with our model.
Result highlights
The bottom-line was flattish YoY because higher service costs and SG&A expenses offset the effect of the marginal increase in total revenue and higher other income and a lower headline corporate tax rate. The QoQ rise was led by seasonality, a decline in SG&A (there was a surge in marketing costs in 1Q13) and an ad income recovery. TV ad receipts declined 3% YoY but rose 10% QoQ (Nielsen’s estimated a 3% YoY dip). The TV ad income erosion was due to weak program ratings for new shows under the January program revamp. The ratings of in-house news programs remained weak in 2Q13 (but improved in July).
Revenue from special govt projects rose strongly. Radio ad income increased by 5% YoY and 25% QoQ, boosted by the bundling of marketing events with ad sales. Concession revenue expanded by 15% YoY and 20% QoQ. Income from new media was flattish YoY and QoQ. Service costs increased by 10% YoY in tandem with the broadcasting of more in-house TV shows.
Outlook
We expect 2H13 ad revenue to rise HoH and YoY, led by another frequent TV programming revamp and subsequent improved program ratings in 2H13, greater special govt project income and TVCs in live EPL soccer match slots. But management’s FY13 top-line target of Bt6.5bn—up 14% YoY—looks too optimistic, given 1H13 revenue growth of just 1% YoY. Hence, we have revised down our FY13 income assumption by 7% to Bt6.27bn.
What’s changed?
We have cut our FY13 profit forecast by 11% to Bt1.87bn to factor in our 7% top-line assumption downgrade. Hence, our YE13 DCF-based target price declines 9% to Bt51.
Recommendation
Our BUY rating stands, premised on scope for upside from digital network and facility licenses, a cheap valuation—a FY14 PER of 13x—and a generous dividend yield of 6-7%.
