Workpoint Entertainment

Workpoint Entertainment Plc (WORK)

Above estimate: WORK reported a Bt138m net profit for 2Q12, down 6% YoY but up 79% QoQ. The result was 15% above our estimate, thanks to 10% lower SG&A than assumed. Revenue was in line with our model. Gross profit was 5% above our projection. The firm announced a Bt0.80 DPS for 1H12 operations.
Results highlights: The QoQ net profit jump was due to high season. The YoY slippage was because of the high base set by 2Q11 with recognition of two major marketing events in 2Q11—Acheewa project (Bt100m) and Thailand’s Got Talent (the remaining Bt40m in the quarter). However, in 2Q12, there were four smaller marketing events—Thailand’s Got Talent Season 2 (one month of revenue recognition—Bt10m), Songkran Day (Bt30m), Tukki Concert (Bt13m) and the Tourism Authority of Thailand sponsorship (Bt10m).
TV ad revenue (including satellite TV) was flattish YoY, but jumped 28% QoQ. The average TV loading factor was 90%, against 90% in 2Q11 and 70% in 1Q12. Satellite TV, which started airing on Feb 20, 2012 as Workpoint TV, gained significant viewership; its revenue was Bt38m in 2Q12 (against Bt14m in 1Q12) and its gross profit was Bt18m, following Bt2m in 1Q12.
Outlook: Due to weak 1H12 revenue, the firm revised down its FY12 top-line target from Bt2.3bn to Bt2bn (but upped its FY12 satellite TV income guidance from Bt100m to Bt120m). In 3Q12, there will be one major event, Workpoint Festival (Bt40m), and two commissioned TV shows—Thailand’s Got Talent Season 2 and the Voice. We expect Bt200m in events revenue in 2H12 (including two state agency events), up from Bt111m in 1H12. Two movies—Yod Manoot and the animated film Yak—will screen in 4Q12. WORK will bid for rights to the 2013-14 English Premier League season. We forecast a 3Q12 net profit of Bt100m, flat YoY but down 27% QoQ on seasonality.
What’s changed? We maintain our FY12 earnings forecast unchanged.
Recommendation: WORK is clearly overvalued—an FY12 PER of 19x. We reiterate our SELL rating.