Workpoint Entertainment

Workpoint Entertainment Plc (WORK)

Investment thesis
Following the analyst meeting, we are more positive about WORK’s FY13 outlook—we now have expanded expectations for TV and satellite TV ad revenues. The firm will launch three new TV shows and increase ad rates for seven TV programs, effective Jan 2013. Two new satellite TV channels (a JV with PSI) will enhance FY13-14 revenue growth. We have upgraded our rating from HOLD to BUY and upped our YE13 target price to Bt42, premised on: 1) new shows and ad rate increases, 2) robust FY13 earnings growth and 3) scope for upside from the new live theater house in FY14. 

Three new shows and ad rate increases for seven shows in FY13
The firm will launch three new TV shows in FY13—Game Pan Din Wai (G-War) on Channel 5 (75 minutes/week, Bt120K/min) and Science Fighting (60 minutes/week, Bt350K/min) and Off Fit Pichit Jai on Channel 9 (75 minutes/week, Bt350K/min)—and will expand its broadcasting time for Fan Pan Tae by 25 minutes, effective Jan 2013.
Furthermore, it will increase ad rates for seven shows in FY13: 1) Ching Roi Ching Lan Sunshine Day (9% to Bt380K/min), 2) Ching Roi Ching Lan Holidays (20% to Bt300K/min), 3) Talok Hok Chak (7% to Bt300K/min), 4) Who is Who Identity Thailand (17% to Bt350K/min), 5) Wong Kam Lao (10% to Bt330K/min), 6) Oh! My God (8% to Bt280K/min) and 7) Ching Cha Sawan (10% to Bt330K/min).

Bt270m revenue increase
We estimate Bt270m in extra annual TV revenue from the new shows and ad rate increases, assuming 60:40 revenue-sharing between WORK and MCOT and a 20% mean discount to its headline ad rates. As such, our FY13 TV ad revenue forecast rises by 14% and our net profit projection increases by 12% (assuming a net margin of 27%). The firm guides that FY13 TV ad income will jump by 25% to Bt2bn.

Potential ad rate increases for its free-to-air satellite TV
WORK will increase its satellite ad rate by 67% to Bt10K/min in FY13, due to higher ratings, and will add two more channels (a JV with PSI) during FY13-14. It targets a satellite TV revenue jump of 92% to Bt250m in FY13—Bt200m from its existing channel and Bt50m from the new channel—and Bt350m in events revenue, up 17%.

Earnings and target price upgrades 
We have revised up our top-line forecasts by 15% for FY13 and by 23% for FY14, to reflect the new shows and ad rate increases and greater satellite TV ad revenues. Our FY13 and FY14 net profit projections rise by 16% and 20%, respectively. Our YE13 PEG-based target price increases to Bt42, implying a PER of 18x.