BEC World

BEC World Plc (Plc) 

Investment thesis

BEC’s aggregate audience share (for its three digital channels) and its mean TV rating continued to drop further in 4Q14 through to Jan 2015. Particularly, shares of its SD and Family Channels are negligible relative to WORK and other digital channels. We are skeptical as to whether it can maintain its high analog ad rates and ad revenue given its declining audience share and TV rating. Our SELL rating stands. 

Further declines of audience share and TV rating in January

Nielsen’s latest audience share and TV rating indicated that BEC continued to lose both MoM for Jan 2015. BEC’s aggregate audience share for its three channels—including the HD Channel (simulcast with its Analog Channel), the SD Variety Channel and the Family Channel—dropped from 27.5% in Dec 2014 to 26.9% in Jan 2015. The 24-hour TV rating (15 years+ nationwide) for its three digital channels also dropped from 1.99 in Dec 2014 to 1.90 in Jan 2015. Its prime-time rating (18:00-23:00 15 years+) dipped slightly from 3.99 in Dec 2014 to 3.96 in Jan 2015. Its 18-hour TV rating (6:00-24:00 15 year+) also slipped from 2.62 in Dec 2014 to 2.53 in Jan 2015. 

We believe that BEC will continue to lose its audience share to other new digital players. In particular, the ratings for its Family and SD Variety Channels remain negligible at 0.02-0.03 and the ad spend share for both channels are marginal at 1.7-2% altogether, led by weak content and program reruns. Although BEC plans to add new content on its SD and Family Channels in 1Q15, it will take time for its two channels to boost shares and vie with other digital players such as WORK, RS and GRAMMY’s ONE Channel. 

Insights into 4Q14—the earnings tumble

We model a Bt950m net profit for 4Q14, down by 32% YoY and 12% QoQ. The YoY profit tumble is due to heavier digital-related expenses (personnel, digital network and equipment, programming and license fee amortization expenses), which should have outweighed the effect of a slightly higher ad revenue. The QoQ drop is led by lower ad revenue (due to the weak consumption climate and continued loss of audience and ad spend shares) and seasonally higher SG&A expenses. We assume GM of 41.6% in 4Q14 (54.7% in 4Q13 and 43.8% in 3Q14) and a Bt3.84bn ad income for 4Q14, up 1% YoY but down 3% QoQ. 

Revenue from concerts & shows should dive 64% YoY and 47% QoQ) due to the weak state of the economy. Only two concerts were held in 4Q14—Kyary PamYu PamYu and Love is Special Dojo. We assume only Bt100m in aggregate revenue for its SD and Family Channels in 4Q14, which is stable QoQ. Its aggregate audience share for three digital channels dropped to 28.0% in 4Q14 against 31.2% in 3Q14 and 35.8% in 4Q13. Its aggregate ad spend market share also declined to 25.7% in 4Q14 against 29.4% in 3Q14 and 31.0% in 4Q13.