Workpoint Entertainment

Workpoint Entertainment Plc (WORK)
Investment thesis
Our BUY rating for WORK stands, premised on: 1) anticipation of a 2H13 earnings recovery and 2) the greatest scope for upside from winning digital channel licenses of our Media coverage. The stock is our top pick in the sector.
Diminished top-line expectation for FY13
The firm has cut its FY13 revenue target by 7% to Bt2.5bn to factor in a lower 2H13 movie income estimate. It now targets launching only one film in 2H13 (down from three). However, WORK maintains its FY13 TV revenue (including satellite TV) target of Bt2bn (up 20% YoY), despite the prevailing domestic consumption growth slowdown. Its FY13 income targets remain Bt300m for satellite TV (Channel 6 and Workpoint TV Channel) and Bt400m for events (up 36% YoY). Our Bt2.4bn FY13 top-line forecast is much more conservative than management’s because we factored in the impact of a 2H13 domestic consumption slowdown.
Three new TV shows and more concerts in 2H13 
The firm will launch three new TV shows in 2H13—Carabao The Series (Channel 9; starting August 28), 2014 Women’s Volleyball World Championship (Channel 3 and re-runs; September 4-8) and The Band (Channel 9; starting October). Revenues from Carabao the Series and the Band will include both sponsorship and sales of ad minutes. Income from The Volleyball World Championship will be entirely ad-generated. WORK has so far closed sponsorship deals for 45% of its target for Carabao the Series and for 80% of its target for The Band.
Three TV shows are being produced for the third parties (to be booked under events revenue) in 3Q13—Thailand’s Got Talent Season 3, The Voice Season 2 and Roi Mue Sang Muang. We estimate Bt300m in revenue from the three productions—Bt40m in 2Q13, Bt140m in 3Q13 and Bt120m in 4Q13. Moreover, WORK will host two concert/stage shows in 4Q13—Three Cha Carniwow (Bt35m in revenue in 4Q13) and Oh! My God stage show.
Black ink for the satellite TV operation in 4Q13 
We expect the satellite TV operation to post a shallower QoQ net loss for 3Q13 and a profit for 4Q13, thanks to lower OPEX for Workpoint TV Channel as a result of cutting the proportion of outsourced content and the full impact of ad rate increases for the station in 2H13.
FY13 earnings forecast and target price cuts
We have reduced our FY13 net profit projection by 12% to Bt380m to factor in the 7% top-line forecast downgrade. Hence, our PEG-based YE13 target price drops 14% to Bt38.