BEC World

BEC World Plc (BEC)
Slightly below our model
BEC reported a Bt1.39bn net profit for 3Q13, up 10% YoY but down 2% QoQ. It was 4% below our estimate, due to higher SG&A and an unexpected loss for the concerts & shows unit (we had assumed a profit for concerts & shows). GM was 51.9% (squeezed by the concerts & shows loss); we had modeled for 54.9%.
Result highlights
The YoY rise was due to higher ad income, led by a 15-minute extension of the super-prime Thai soap opera slot in July 2013, ad rate increases in January and May 2013 and the headline corporate tax cut. The QoQ dip was, due to a loss at the Sonic Bang 2013 Music Festival. The other three shows in 3Q13—Ronan Keating, Barbie and Justin Bieber—made profits. Concerts & shows posted a Bt52m gross loss for 3Q13, against a Bt16m gross loss for 3Q12 and a Bt55m gross profit for 2Q13.
Ad revenue was Bt3.83bn, up by 12% YoY and 2% QoQ and a new record. Income from concerts & shows jumped 108% YoY (but dropped 10% QoQ). Service costs rose by 29% YoY and 7% QoQ, due to huge costs tied to organizing Sonic Bang 2013 and higher programming costs associated with enlarging super-prime slots. SG&A expenses increased by 18% YoY and 5% QoQ on a corporate donation for flooding relief that booked during the quarter.
Outlook
Management said revenue growth was 8-9% YoY in October and guides for good November ad bookings. But BEC declined to estimate Dec ad bookings, in light of the unfavorable prevailing political climate. Note, however, that BEC now has the highest super-prime viewership ratings of any broadcaster (Channel 7 still beats BEC in overall audience share).
The firm increased the ad rate for Rueng Den Yen Nee by 10% (to Bt220k/min) effective Nov 2013. We estimate only a marginal impact—about Bt90m in annual revenue (rises of 0.5% to the top-line and 1.5% to net profit). We have already factored this ad rate rise into our model. BEC launched four new shows in 4Q13—Luem Jone (sitcom), Team Nee Pee Rak (soccer), Toob Satitee (sport) and the Family Gang (variety). A Bt1.28bn net profit is expected in 4Q13, up 11% YoY but down 8% QoQ.
What’s changed?
We have cut our net profit forecasts by 4% to Bt5.48bn for FY13 and by 8% to Bt5.88bn for FY14 to factor in the slightly weak 3Q13 earnings and a higher FY14 OPEX assumption. As such, our YE14 target price falls 9% to Bt62.
Recommendation
Our TRADING BUY rating stands, premised on a solid FY13-14 earnings profile.