Media

Media 

 

- 3Q15 earnings were mixed for TV operators  

-Ad spending in October improved MoM but not much  

- MAJOR remains our top pick (TP Bt36); we believe BEC (TP Bt38) has touched bottom and will get back on its growth track  

 

Still poor 3Q15 performance. Of Thailand’s TV operators, only BEC bucked the tide and posted a gain of 10% QoQ backed by its cost controls: WORK sank 48% QoQ to Bt59mn (Bt50mn of this came from a retroactive adjustment of sales commissions), RS plunged 35% QoQ to Bt27mn and MCOT fell 63% QoQ if removing provision reversal of Bt56mn. Behind the sorry performance was higher content costs.  

4Q15 not much better. According to Nielsen data, ad spending in October increased by 6% from September to Bt10.2bn. TV again led the pack with 7% MoM rise in October; drags were magazine and out-of-home media. Still, no one is enjoying true improvement in 4Q15 from 3Q15 since 4Q is also high season. We and the market have again revised 2015 forecast down.     

Economy is an important driver. Over the past year, we have seen a steady decline in profit in the media sector, especially for television operators. Behind this segment’s troubles is first the startup of digital TV – with its enormous expenses – and second the economic slump. By our estimates, based on reports by Nielsen, ad spending on TV in the period January to June slid ~1% from 1H14. We are optimistic about the stimulus package and expect this to trigger greater ad spending on TV, removing one of the sector’s major drags.  

BEC set to benefit most when economy recovers. BEC generally beats others in the sector when the economy comes back up, as advertisers tend to spend their money where they believe they will get the most exposure. Since long-time players Channels 7 and 3 (BEC) have millions of faithful viewers (Figure 4 shows their ratings), that is where the money will go; any leftovers will go to smaller players like WORK and RS. As the economy strengthens, ad spend will begin to feed into all operators.