BEC World

BEC World Plc 

 

Investment thesis

What’s new? 

BEC executive vice president Surin Krittayapongpan said that Channel 3’s 9M15 revenue (about 80-90% of BEC’s consolidated revenue) will drop 7-8% YoY and BEC’s 9M15 revenue will drop 5-8% YoY. The firm targets FY15 total revenue to decline 5-10% YoY and its FY15 net profit to drop more than 10% YoY. The 9M15 drop is attributable to the persistent weak global and domestic economy (ad budget cuts) and more digital players (whose ad rates are cheaper than BEC’s). The ad rates of news programs, Rueng Lao Chao Nee, Rueng Den Yen Nee and Thieng Wan Than Hate Karn, have dropped in tandem with their ratings drops. The ad rate of the Khao Sam Miti news show remained solid during 9M15 (up 4-5% YoY). The 4Q15 ad revenue is yet to improve from 3Q15 due to sustained weak consumption.

Diminished revenue and earnings expectations for 3Q15 

We understand that BEC’s 9M15 revenue drop of 5-8% YoY, based on management’s guidance, meant only the advertising revenue. Given that its consolidated ad revenue dipped 1.3% YoY for 1H15, it implies that its ad revenue for 3Q15 will be in the Bt3.2-3.5bn range, or down 12-19% YoY, assuming the above scenario of a 5-8% YoY drop for its 9M15 ad revenue. We believe that the 19% YoY drop for its consolidated ad income is way too steep for BEC; hence, we assume a Bt3.5bn ad income for 3Q15, down 12% YoY. 

With the new ad revenue of Bt3.5bn for 3Q15, we now model a Bt600m net profit for 3Q15, down 45% YoY and 20% QoQ, which is lower than our previous Bt700m estimate for 3Q15. We believe that there is also a downside risk to our FY15-16 earnings forecast and DCF-based target price, given the firm’s guidance of a FY15 total revenue drop of 5-10% YoY, against our current projection of a 1.8% YoY rise for FY15 total revenue. Despite a QoQ high season, we expect 4Q15 earnings to remain subdued in the wake of gloomy ad spend from industry.

Lower rating of BEC’s HD (analog) channel expected in September

Besides lower ratings of news shows above, we believe that ratings for its super-prime Thai soap operas are likely to soften this month, due to three weaker super-prime Thai soap opera contents—Puen Rak Puen Risaya (4-4.2), Nang Rai Tee Rak (4.0), Khor Pen Chao Sao (5-5.5)—in September against Channel 7’s—Pleung Tawan (6.4-6.9), Roy Rak Roy Kaen (8.0-8.2), Paya Asoke (6.8-7.3) and Kah Ma Kab Pra (the last episode on September 13, 11.5-14.3). We expect BEC’s super-prime soap opera ratings to flow to Channel 7 also this month. Based on Nielsen’s rating, BEC’s rating (4 years+ nationwide) for its HD Channel (simulcast with its analog channel) flipped to drop in August to 1.899 (from 2.153 in July). Our SELL rating stands, on the loss of its competitiveness and share to other digital players in the long term. Despite the expected 2H15 earnings bottom-out, it remains yet to be seen if ratings at its HD (analog) channel will improve in 1H16.