MCOT

MCOT Plc 

Investment thesis

MCOT’s fundamentals will deteriorate further in FY15, led by the continued loss of audience share and TV ratings to other digital players (due to its weak programming) and greater downside risk to its FY15 concession revenue (assuming True Visions’ continued subscriber migration to its NBTC-licensed subsidiary). Despite its TV program revamps expected in FY15, we are skeptical as to whether its content can rival that of other digital players, such as WORK and RS. We have cut our earnings forecasts for FY14 by 13% (to Bt520m) and 10% FY15 (to Bt555m) to reflect weaker 4Q14 earnings and lower TV ad revenue. Our YE15 target price declines to Bt15. Our SELL rating stands.

Continued loss of audience share and program ratings in Jan 2015 

Nielsen’s audience share and TV rating for Jan indicated that MCOT continued to see drops in both, MoM. MCOT’s aggregate audience share—including the HD Channel (simulcast with its Analog Channel) and the MCOT Family Channel—dropped from 4.9% in Dec 2014 to 4.2% in Jan 2015. The aggregate mean TV rating (15 years+ nationwide) for its two digital channels also dropped from 0.35 in Dec 2014 to 0.31 in Jan 2015. We believe that it has lost its ad spend share to other digital players and because WORK has withdrawn four of its TV shows—Oh! My God, Ching Cha Sawan, Identity Thailand and Fan Pan Tae—from MCOT’s HD to its digital channel, effective Jan 2015. 

Some positive impact of program revamps expected in 2H15  

As it plans to launch TV program revamps in FY15—the HD Channel in Feb and the Family Channel in May, we then expect some positive impact on its revenue in 2H15. But we are skeptical over the revamped content’s ability to match that of WORK or RS. WORK’s audience share was 7.6% and its mean TV rating was 0.56 in Jan 2015, which ranks it third behind Channel 7 and BEC. MCOT came in fourth, slightly above RS’s audience share of 4% and its TV rating of 0.30. We believe that it might need to give more discounts and offer more bundled packages to clients to boost ad revenue in FY15.

Insights into 4Q14—the earnings tumble 

We assume a Bt70m net profit for 4Q14, down by 79% YoY and 22% QoQ. The profit plunge is caused by the ad revenue drop (related to weak broad consumption and declines in audience and ad spend shares) and a plunge in concession revenue (due to True Visions’ continued migration of subscribers from the MCOT’s concession to its NBTC-licensed subsidiary). TV ad revenue will likely drop 30% YoY and 7% QoQ. Radio ad revenue remains solid—up by 5% YoY and 12% QoQ. Concession revenue will tumble 55% YoY and 20% QoQ. 

Its total audience share (including digital TV) dropped to 5.2% in 4Q14 against 6.0% in 3Q14 and 7.6% in 4Q13. Its ad spend market share (including digital TV) also declined to 10.7% in 4Q14 against 13.5% in 3Q14 and 18.1% in 4Q13.