MCOT

MCOT Plc
Investment thesis: We reiterate our HOLD rating on MCOT, premised on a cheap valuation and a high dividend yield. The key operational challenge lies in whether July's program revamp and the removal of Nation news slots will improve overall ratings or not. The board is to appoint a new president in October or November, which might boost the share price.
YoY profit decline expected for 2Q12: We estimate a Bt450m net profit for 2Q12, down 10% YoY but up 27% QoQ. The YoY profit slippage is due to lower TV ad revenue (as a result of lower ratings following the 2011 entertainment program revamp) and higher OPEX. The QoQ bounce is thanks to ads for the EURO 2012 soccer tournament and a general recovery in ad spend following the 4Q11 flooding. OPEX will post a YoY jump, due to higher leasing costs for Ku-band transponders, salary increases, effective Jan 2012, and more in-house programming.
TV ad revenue fall: We estimate Bt955m in 2Q12 TV ad revenue, down 7% YoY but up 17% QoQ. That would be worse than Nielson's numbers, which indicate that MCOT's 2Q12 ad spend declined by just 3% YoY. The broadcaster's average audience share dropped to 8.1% in 2Q12 from 9% in 2Q11, due to weak programming. Its ad spend share fell to 19% in 2Q12 from 20% in 2Q11. The average TV loading factor in 2Q12 stood at 90%, down from 99% in 2Q11, but up from 76% in 1Q12. Radio ad revenue dipped 3% YoY but rose 12% QoQ. The retreat in radio ad revenue was mitigated by various EURO 2012 events.
July program revamp: MCOT's weak programming has meant that its audience share declined from 9% in FY11 to 7.8% in July 2012. The firm launched a program revamp in July that focused on news rather than entertainment. It also implicitly increased some of its ad rates by 15-25% with the new shows. Under the July revamp, the Nation's news programs were pulled. The feedback from MCOT's in-house morning news show suggested approval, but that hasn't been the case for evening news programs, at least not yet.
New president expected in Oct-Nov: The application deadline has been moved back to Aug 24. Qualification screening is slated for Sept, selection in Oct or Nov.