BEC World

BEC World Plc (BEC)
- 3Q13 profit to rise 13.1%yoy due to rising advertisement rate and program reshuffle
Despite decreasing purchasing power, BEC's advertisement revenue is likely to
rise by 0.9% from 2Q13, as BEC has 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. Moreover, there has been 15-minute extension for
Monday-Thursday superprimetime Thai drama, making it 2.45 hours, boosting
BEC's income because it is the time with the highest advertisement rate
(B0.48m/minute). BEC's main income from other sources (e.g. concerts,
copyright) is likely to drop implicitly from 2Q13, as there is no big concert,
decreasing sales and service income by 2.6%qoq. However, gross profit
margin is projected to rise from 53.9% in 2Q13 to 55.3%, as there is less
income from concert in 3Q13 that provides lower gross profit margin than
advertising revenue. 3Q13 net profit is projected close to 2Q13 at B1,436m,
rising 13.1%yoy due to rising advertising price (since early-2013) and
extension of drama broadcast time.
- 34% audience base to boost FY2013 profit growth by 20%
With strong content and famous personnel on news and drama, despite lower
purchasing power, BEC can seize 34% audience base of nationwide free TV
audiences, and its advertisements have nearly reached its full capacity. Thus,
4Q13 advertisement revenue is likely to grow continuously, boosting FY2013
net profit growth by 20% and by 7.4% in FY2014, in line with our forecast.
There would be more competition from new 24 digital TV channels, of which
auction envelopes will be submitted to NTBC on 28-29 October, making
advertising rate hike harder than in the present. However, BEC has stronger
audience base, contents and financial position. Moreover, BEC has bought
auction envelopes for four channel types. BEC is projected to win the auction
for three channels: HD channel that will be broadcast as a replacement of the
current analog system, a variety channel, and a children channel. Thus, BEC is
projected to have more servicing capacity, compensating for harder
advertising rate hike in the future. Moreover, BEC generates revenue from
broadcasting its existing analog channel until the end of concession on 31
March 2020. Analog channels can gain more eyeballs than digital channels, as
most TV cannot access digital channels unless set-top-box is installed. Also,
digital network takes four years for nationwide coverage.
- Digital TV channels to boost growth. Media's top pick.
BEC benefits from digital TV channel auction. As BEC's fair value is B78 (DCF),
with 32% upside and FY2013 expected dividend yield at 4.8%, we reiterate
"BUY" and choose BEC as the top pick of this sector.