BEC World

BEC World Plc (BEC)

- 1Q14 profit unchanged due to political turmoil
BEC executive revealed that advertisement revenue has been growing at the
slower rate since December 2013, so 4Q13 advertisement revenue was close
to 3Q13. 4Q13 net profit was B1,393m, staying flat qoq despite being the
peak season. Overall, FY2013 net profit grew by 17%yoy to B5,589m (2.5%
below our expectation). During the first two months of 2014, BEC's
advertisement revenue stayed unchanged yoy because there have been fewer
new advertisers as a result of the political turmoil. However, BEC is confident
that advertisement spending will return after the political turmoil subsides, so
advertisement revenue is projected to grow in 2014.
- Revise down earnings forecast due to expense from digital TV channels
In April 2014, BEC will launch a trial of its three new Digital TV channels.
Channel 3 will be broadcast both on analog TV channel and HD Variety
channel, and BEC does not have to pay 4% profit sharing to NBTC until the
end of the concession of existing analog channel on 31 March 2020. BEC
would still have to pay profit sharing for SD Variety channel and SD children
channel, but the expense on these two channels are not likely to be high, as
BEC already has the contents for them and they do not need to be broadcast
24 hours. BEC would need to book additional B750 expense from the three
new Digital TV channels, mainly from amortization of the license and network
rental. Meanwhile, BEC will benefit from more income from the Digital TV
channels and increasing advertisement revenue after the political turmoil
subsides. Overall, we revise down BEC's FY2014 net profit by 9.6% to reflect
the additional expense from the new Digital TV channels. However, with BEC's
strong contents and the new Digital TV channels' good rating, FY2015 net
profit is expected to leap by 10.2%yoy.
- Investing for long-term benefit
Strong contents and additional service capacity from digital TV channels are
likely to promote BEC's long-term growth. BEC's FY2014 fair value (DCF) is
B64, implying 26% upside, with over 5% dividend yield. We reiterate to buy.