BEC World

BEC World Plc (BEC)

Core profit slightly above estimate: 4Q11 net profit exceeded our estimate by 13%, thanks to a much lower-than-modeled deferred tax provision of Bt2m (we had assumed Bt60m). Core earnings were 3% above our model. After-tax profit was in line with our estimate. 
Results highlights: BEC posted a Bt689m net profit for 4Q11, down by 23% YoY and 30% QoQ. There was an extra item—a Bt2m deferred tax provision. Core profit tumbled by 18% YoY and 30% QoQ. The weaker operation was attributable to the flooding, which prompted clients to slash ad spend during Nov-Dec. Moreover, BEC cut broadcasting time for Thai soap operas by 90 minutes/day in Nov to reduce costs; it resumed normal programming in Dec. 4Q11 ad revenue fell by 6% YoY and 13% QoQ. Disaggregated by month, BEC’s stand-alone ad revenue rose 8% YoY in Oct, then plunged 27% YoY in Nov and dropped 9% YoY in Dec. There was a MoM recovery in Dec.
Outlook: The firm will increase ad rates for three prime-time slots—Khao Sam Miti (from 290K/min to 330K) and Korean series (from 290K/min to 330K) effective March 2012 and Rueng Lao Sao Arthit (from Bt260K/min to Bt290K)—effective July 2012. BEC launched four new shows in Jan, two of which involve indirect ad rate increases—Ching Roi Ching Lan, which replaces the Sunday movie (from Bt200K/min to Bt350K) and Sport Ranger 2, which replaces World Cartoon (from Bt200K/min to Bt220K).
BEC will launch Thailand's Got Talent Season 2 in June and The Voice Thailand in Sept 2012. It will also air 28 of the 31 UEFA Euro 2012 Cup matches (June-July 2012) and partial coverage of the 2012 Olympic Games (July-Aug 2012). Management guides for Jan ad revenue growth of 8.5% YoY and hinted at double-digit YoY expansion for Feb.
What’s changed? We preliminarily estimate annual incremental revenue growth of Bt287m, brought about by ad rate increases for the five shows noted above, boosting net profit by 2%. For Ching Roi Ching Lan, we assume 60:40 revenue-sharing between WORK and BEC. Hence, we have revised up our FY12-13 profit forecast by 2% and our target price by 3% to Bt47.
Recommendation: Our BUY rating stands. 4Q11 was the nadir and numbers will recover strongly in 1Q12