Workpoint Entertainment

Workpoint Entertainment Plc (WORK) 

 

Investment thesis

Advertisers were more cautious with spending this year, given that domestic consumption has yet to fully recover. But, Workpoint TV, with ratings ranking first among digital channels, will be one of the top targets for ad spending in 2016. The first quarter is low season for the media business, but its earnings outlook for the whole of 2016 remains strong, due to the sustained rises in its digital rating and ad spend. The firm will add more content to push its rating up further in 2016; the sustained high rating should enable it to command higher ad rates. Our BUY rating stands.

Its 15 year+ digital rating targeted at 1.2 by YE16 

The 18-hour rating for Workpoint (15 years+ nationwide) rose to 1.19 during 1-13 Mar, up from 0.8 in Dec last year, led by new variety content—Vateetong Vateether (average rating of 1.4), I can see your voice (average rating of 3.9) and Let me in Thailand (average rating of 5.3). On the other hand, its latest soap opera—Nar Gak Nang Aek—received the poor rating of 0.9. WORK content costs are expected to be Bt650m in the current year, up from Bt430m last year. Moreover, it will focus on other content, especially sports programing. The women’s Olympic volleyball qualification rounds are to air this year. The rating (15 years+) is targeted to be 1.2 by YE16, against 1.0 at YE15, which looked too conservative compared to its current rating of 1.19.

Low season of media business represented in 1Q16

We model a Bt56m core profit for 1Q16, a reversal to core profit YoY but flattish QoQ. The expected turnaround core profit YoY is due to higher revenue from digital TV channel. The flattish QoQ is led by the low seasonality for the media business offsetting the bonus payout in 4Q15. For digital TV business, we expect the mean ad rate to rise 5% QoQ (to Bt47k/min) and the utilization rate to drop to 60% in 1Q16. 

Strong revenue growth target

WORK targets 26% revenue growth this year to Bt3bn, in line with our projection. It also targets a net margin of 11%, higher than our more conservative expectation of 9.5% in 2016. The firm sets a target of Bt2.7bn for its media business (digital, satellite and other TV business) in 2016, a jump of 35% YoY, led by a rise in digital TV’s mean ad rate to Bt50k/minute (up 39% YoY). Its media business revenue target is also consistent with our model. We assume a rise in the mean ad rate to 46k/minute (up 28% YoY) with an 83% mean utilization rate (against 75% in 2015). Management guided that the firm had sold Bt1.6bn in advertising spots for 2016 (average ad rate of Bt40k/min). Other businesses revenue (concerts, plays and event management) are expected to be Bt350m. 

Dinosaur Planet project to support earnings

The Dinosaur Planet project will open during late Mar and run until Jan 2017; WORK held a 30% shareholding in a JV company, and it expects the project to generate revenue of Bt500m in 2Q16-Jan 2017 with audiences of 2k/day and average ticket price of Bt500