Workpoint Entertainment

Investment thesis 

There were both positive and negative points at the analyst meeting. On the positive side, WORK claims a higher mean viewership and increased the ad rates for its digital TV channel. On the negative side, management now guides for lower earnings than the consensus forecasts (but in line with our models for FY14), due to heavier OPEX. The new guidance will prompt street projection cuts for FY14-15. Our HOLD rating stands, due to the poor bottom-line profile.

Higher rating, ad rate increases

Among pay-TV subscribers, Workpoint Creative TV channel’s rating increased to 0.31 in Aug (from 0.20 in April), higher than Channel 5’s rating of 0.29, according to Nielsen. (note that a rating of 1 = 1.2m households; Channel 7’s rating is 3.70, Channel 3’s is 2.58). Its TVC slot utilization rate has jumped to 70% currently from 25-35% in April. WORK targets a rating of 0.4 and a utilization rate of 80-100% by YE14. Given the improved mean viewership and utilization rate, the firm has upped its mean ad rate for Workpoint Creative TV to 15-20k/min for 2H14. WORK also expects an FY15 mean ad rate of 30-40k/min. The guidance is in line with our mean ad rate assumptions, which are Bt18k/min for FY14 and Bt35/min for FY15.

However, the NBTC has yet to distribute analog-to-digital converter set-top box coupons and Nielsen won’t start officially rating digital terrestrial TV channels till next year. It remains to be seen whether WORK will hold the same rank among broad TV viewers as among pay-TV subscribers.

New NBTC numbering rules for channels of pay-TV operators

Concerns were expressed at the meeting that the NBTC’s new rule requiring pay-TV operators to number their channels in accordance with digital commercial channel numbers might affect Workpoint Creative TV’s viewership. Note that Workpoint Creative is currently carried as channel 1 and 33 on PSI’s pay-TV platform. Under the new NBTC rule, it will drop to channel 23, so we expect it to lose some viewership. But management said the Workpoint Creative is now widely watched, so it expects to hold its viewership, despite being relegated. 

Analog TV to drop; FY15 revenue to be driven by other businesses

The firm expects its revenue from analog TV to decline to Bt0.7-1bn in FY15, due to lower analog ad rates and no. of programs (WORK plans to move some programs currently on analog TV to its digital channel). However, higher revenues from digital TV, events and concerts & plays will expand its top-line, which is targeted at Bt3bn in FY15 (in line with our model). Construction of WORK’s new playhouse (1,000 seats) will be completed by early next year. The firm expects revenue from concerts and plays of Bt350-400m in FY15 (we assume only Bt300m). Net margin will fatten from 3-4% this year to 7-8% in FY15. Management also guides that net profit will normalize (in the range of Bt300-400m) in FY16-17.