Plan B Media

Plan B Media Plc (PLANB)

Investment thesis
Expectations for strong earnings growth momentum throughout 2016, together with PLANB’s robust earnings growth profile—27% net profit growth based on CAGR during 2015-17 against a 9% growth CAGR for the broad SET—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.
FY15 revenue growth to outperform the industry 
The Thai media industry gradually picked up in 2015 since the previous year’s political unrest—FY15 total ad spend increased 3% YoY to Bt122bn against a 10% YoY contraction in 2014, led by massive growth in digital TV media (up 144% YoY). Scoping down to the Out-of-Home (OOH) media sub-sector (outdoor, transit, and in-store media), the ad spend in the OOH media sub-sector contracted 5% YoY to Bt9.3bn. Within the OOH media sub-sector, transit media posted the strongest growth of 17% YoY to Bt4.5bn, followed by outdoor media (up 7% YoY to Bt4.3bn). In contrast, the in-store media ad spend continued to shrink—dropping 67% YoY to Bt639m (Figure 1). PLANB’s revenue growth is expected to outpace the industry substantially—we expect the firm’s revenue to jump by 48% YoY in 2015.  
Strong earnings growth momentum expected for 4Q15  
We expect PLANB to post a 4Q15 net profit of Bt115m, up 41% YoY and 4% QoQ. The 4Q15 core profit is also expected to be Bt115m, up 41% YoY and 4% QoQ (Figure 2). The key earnings growth drivers were: 1) greater utilization rates of existing media, 2) revenue recognition from new projects launched during 2015, 3) revenue sharing from Hello Bangkok LED (HELLO), 4) fatter gross profit margin QoQ and 5) lower interest expenses (as the firm used IPO proceeds to repay debt).
The overall utilization rate is expected to increase to 76% in 4Q15 from 73% in 3Q15, driven by rising utilization rates of static and digital media. However, the overall utilization rate is expected to decline from 80% in 4Q14, due to lower utilization rate of transit media. Meanwhile, the gross profit margin is expected to rise to 37.5% in 4Q15 from 36.1% in 3Q15, boosted by higher overall utilization rate. Nevertheless, the gross profit margin is expected to soften YoY from 41.7% in 4Q14, due to a weaker utilization rate of transit media and larger revenue sharing from HELLO, of which yields lower GPM.
Profit in 1Q16 to expand notably YoY   
PLANB’s 1Q16 earnings are expected to expand substantially YoY, fueled by: 1) its larger media portfolio, 2) higher utilization rates of existing media, 3) contribution from projects launched and acquired in 2015, 4) greater revenue sharing from HELLO and 5) lower interest expenses. However, we expect the firm’s net profit to soften QoQ in 1Q15, due to the ad-spending low season. Despite that, there is scope for upside to the firm’s earnings forecast from future investment projects and M&A opportunities both in Thailand and AEC markets.