Mono Technology

Mono Technology Plc 

Investment thesis

Following a recent visit to the company, we feel more upbeat about MONO’s outlook, led by an MVAS business recovery and ad rate jumps for its digital TV channel in FY15-16, enabled by improved viewership ratings. Its business platform will migrate from MVAS and Internet to media and entertainment, as MVAS revenue will be gradually replaced by digital TV income during the next five years. We have upgraded our rating from HOLD to BUY with a new fully-diluted SOTP-based YE15 target price of Bt6.5, premised on earnings expansion through FY15-16 and better prospects for the digital TV business. 

Strong MVAS business recovery started in 2H14

After technical problems related to mobile telecoms firms migrating their subscribers from 2G to 3G networks were resolved in 1H14, MONO’s MVAS revenue rose from Bt84m/month in 1Q14 to Bt105m/month in 4Q14. We expect that the 1m subscribers it lost will be gradually replaced. The MVAS platform has changed from being dominated by Short Message Services (SMS) to mobile value-added services (demand for traditional SMS services is in decline). We expect an overall MVAS revenue CAGR of 5.7%, FY14-19, underpinned by value-added service revenue. 

Higher digital TV ratings in 4Q14 through early Jan 2015 

MONO’s new digital TV channel will replace MVAS services as its main business over the next five years. Its MONO29 channel has a clear position as a broadcaster of foreign TV series and movies. Its mean rating (for 15+ nationwide) rose from 0.021 in May to 0.129 in Dec 2014 and to 0.3 during 1-13 Jan 2015 (which ranks it fifth among all analog and digital TV channels). MONO29’s mean audience share jumped from 0.28% in May to 1.79% in Dec 2014. 

Its mean ad spend share rose from 1.84% in Sept to 2.31% in Dec. MONO29 targets competing with other second-tier digital TV operators—WORK, RS, MCOT and GRAMMY—with an overall mean rating (for 15+ nationwide) of 0.3-0.5 in 2015.

Digital TV expected to break even in mid 2015

Management guides that the mean digital TVC slot ad rate will jump from Bt5k/min in FY14 to Bt25k/min in FY15, up 400%. Its committed ad rate range for Jan 2015 is Bt12-15k/min. The channel will negotiate new ad rates of Bt20k/min during the next few months and will consider hiking the rate again during 4Q15. We conservatively assume that its mean net digital ad rate will rise from Bt5k/min in FY14 to Bt20k/min in FY15 (up 300% YoY) and to Bt33k/min in FY16 (up 65%). We expect the digital TV business to be profitable in 2H15 and assume a Bt150m net loss for FY15, shallower by 73% YoY, led by an increased utilization rate and a higher mean ad rate.