MCOT

MCOT Plc

In line with estimate: MCOT reported a Bt443m net profit for 2Q12, down 11% YoY but up 25% QoQ. The result was in line with our model. Ad revenue exceeded our estimate by 3% (TV ad income was 2% higher and radio ad 7% higher than assumed). After-tax profit fell 1% short of our number.
Results highlights: The YoY profit fall was attributable to lower TV ad receipts and heavier OPEX, which outweighed the impact of the headline corporate tax cut to 23%. The QoQ bounce was driven by ads for the EURO 2012 soccer tournament, high season and a post-flooding ad recovery (MCOT’s TVC receipts didn’t recover properly in 1Q12). TV and radio costs increased by 9% YoY and 1% QoQ, respectively, due to higher TV show production costs, video wall equipment rentals, the leasing of a Ku-band transponder and salary rises.  
TV ad revenue slipped 5% YoY, as Modern 9’s average audience share declined from 9% in 2Q11 to 8.1% in 2Q12 because of weak programming. Moreover, revenue from govt projects dropped YoY, due to ad budget cuts among state agencies. The mean TVC slot utilization rate was 90%, against 99% in 2Q11 and 76% in 1Q12. Revenue from new media was Bt88m, up by 109% YoY and 28% QoQ with the launch of four new satellite channels on C-band and the sub-leasing of Ku-band slots to GMM Grammy. Radio ad revenue posted a rise of 3% YoY and 19% QoQ, underpinned by EURO 2012 marketing activities and sales bundling across MCOT’s nationwide radio network.
Outlook: The firm launched another program revamp in July to increase its audience share. Under the revamp MCOT increased its focus on news at the expense of entertainment shows and pushed up ad rates by 15-25% for TVC slots in the new programs. The feedback from MCOT’s in-house morning news show has been good, but its evening news program has been criticized as inferior to the previous show that was produced by The Nation. We preliminarily forecast a 3Q12 net profit of Bt400m, up 11% YoY but down 10% QoQ. 
What’s changed? We maintain our FY12 net earnings projection unchanged.
Recommendation: Our HOLD rating stands.