Plan B Media

Plan B Media Plc (PLANB) 

 

Investment thesis

Expectations of strong earnings growth momentum throughout 2015,

together with PLANB’s robust earnings growth profile—67% net profit growth based on CAGR during 2014-16—driven by revenue and gross margin expansion, should, in our view, prompt further share-price gains. More interestingly, there is also scope for upside to its long-term earnings from future investments and M&A opportunities, as the company reiterated that it is debt-free, which should facilitate such spending without difficulty.

Increasing utilization rates to boost 2H15 margin expansion

PLANB’s 2H15 outlook is promising, as the second half of each calendar year is normally the high season for the firm’s media. Given that, the utilization rates of its existing media are expected to rise through 2H15. More interestingly, as PLANB has a high operating leverage cost structure, the greater the utilization rates, the fatter the gross profit margin (GPM). In addition, the firm’s 2H15 earnings growth will also be driven by new projects launched (Udon Thani City Network and bus Wi-Fi), a full quarter of revenue sharing from Hello Bangkok LED and lower interest expenses.

Achievable FY15 revenue target with earnings upside potential

The firm’s revenue capacity (assuming 100% utilization rate without revenue sharing from HELLO) will reach a new high of Bt2.5bn in 2015, up 24% YoY.If including the revenue potential from HELLO, PLANB’s FY15 revenue capacity will be Bt3bn, up 49% YoY. Based on the current media inventory, management targets sales growth of more than 35% YoY in 2015, which implies FY15 revenue of not less than Bt2bn and a GPM of more than 38%. Year-to-date, PLANB has already secured revenue of Bt1.83bn for 2015, which should then make this year’s sales target achievable, in our view. We think that there is scope for upside to our FY15 net profit forecast from higher-than-expected GPM. If the 2H15 GPM sustains its strength close to the 2Q15 level (40%+), the average GPM for FY15 would exceed our GPM assumption of 37%. Our sensitivity analysis suggests that for every 1%

increase in GPM from our base-case assumption, PLANB’s FY15 net profit will rise another 4% from our base-case forecast of Bt403m and another Bt0.25/share to our FY15 target price.

Further M&As to leapfrog growth in the future

Apart from the ongoing organic expansion, the recent partnership with

Hello Bangkok LED (HELLO) and its latest acquisition, Triple Play Co.,

Ltd. (air travel media platforms), PLANB will continue to pursue growth

opportunities to strengthen its leading market position. The firm is now

focusing on expanding its air travel media segment and there are more M&A opportunities at the talks stage. PLANB is also focusing on establishing its regional footprint in AEC markets through M&As—Malaysia, Indonesia, and the Philippines are priorities. Management guided that the first regional M&A deal would be in Malaysia. Moreover, the firm is working with Emtek, its Indonesian shareholder, on another M&A deal in the country.