BEC World

BEC World Plc (BEC)

-3Q13 profit slightly lower than expected due to loss from concert and shows
BEC's 3Q13 net profit was B1,436m, 2.9% below expectation, dropping
2.2%qoq. BEC's advertisement revenue increased 1.8%qoq due to 15-minute
extension for Monday-Thursday superprimetime Thai drama (making it 2.45
hours). However, it was negated by concert and show businesses that
reversed from B54m gross profit in 2Q13 to B51m gross loss. Moreover,
higher cost was incurred by the extension of Thai drama broadcast time. Thus,
3Q13 gross profit margin was pressed from 53.9% in 2Q13 to 51.9%, and
SG&A increased by 5.6%qoq. However, BEC's 3Q13 net profit grew 9.9%yoy.
- FY2013 profit to grow by 17%, 3% below expectation.
Maintain forecast
With strong content and famous personnel on news and drama, despite
decelerating 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. However, as 4Q SG&A is usually higher than other quarters,
4Q13 net profit is projected to drop slightly from 3Q13. As 9M13 profit made
up 73.2% of FY2013 forecast, FY2013 net profit is projected 3% below our
forecast. We maintain our FY2013 forecast. However, FY2013 actual net profit
is expected to improve from 2012 by 17%, and continue growing by 10% in
2014 due to programs reshuffle. Though there would be more competition
from new 24 digital TV channels, of which the eligible bidders will be
announced in mid-December and the channels will be broadcast in early-
March 2014, making advertising rate hike harder than in the present, BEC has
stronger audience base, contents and financial position. Moreover, BEC is
projected to win the auction for three channels: an HD variety channel, an SD
variety channel, and a children channel. Thus, BEC is projected to have more
servicing capacity, compensating for harder advertising rate hike in the future.
Also, BEC can generate 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.
Despite decline in purchasing power, BEC’s profit can still grow. Also, BEC is
among companies that benefit from digital TV channel auction. As BEC's fair
value is B78 (DCF), with 39% upside and FY2013 expected dividend yield at
5%, we reiterate "BUY" and choose BEC as the top pick of this sector.