MCOT

MCOT Plc

Investment thesis
Ad rate increases under a Jan 2013 program revamp for 24 TV shows have prompted us to lift our FY13 revenue forecast by 7% and earnings projection by 8%. Our target price rises 18% to Bt52.5 to factor in the higher expectation for profit. Our new FY13 revenue growth forecast of 20% is at the low-end of management’s new target range of 20-30%. We have a BUY rating on MCOT, premised on stronger numbers for 4Q12 and FY13, upside from digital network and channel licenses and because it has the cheapest FY13 PER among regional broadcasters of 14x (the mean PER is 24.4x) and the highest dividend yield of 7%.

12% weighted mean ad rate rise under Jan 2013 revamp
The firm announced a Jan 2013 programming revamp—ad rate increases ranging 5-25% for 24 TV shows, effective Jan 2013. We estimate the weighted average ad rate rise at 12% for the 24 shows (see details, Figure 7), which include four TV shows produced by WORK, three sitcoms by GRAMMY and four in-house news shows, the evening game shows, Bang Orr and Nine Entertainment and two cartoon shows, Dao Kra Jai, The Star and Woody Born to Talk. The Jan revamp will also mean more edutainment content and in-house programs—from 47% currently to 51% at YE13.

FY13 net profit forecast upgraded 8%
At face value, the ad rate increases for the 24 TV shows would appear to boost FY13 revenue by Bt580m, or 9%. We have conservatively revised up our top-line forecast by 7% to Bt6.77bn. As such, our FY13 revenue growth assumption increases from 12% to 20% and our net profit forecast for next year by 8% to Bt2.1bn. Our YE13 DCF-based target price jumps 18% to Bt52.5, due to: 1) our greater expectation for the FY13 bottom-line and 2) an upgraded perpetual terminal value growth assumption from 2% to 4%.

Management more bullish about FY13 revenue growth
Mr Anek Permwongseni, MCOT’s new president, targets FY13 revenue expansion of 20-30% against FY12 top-line growth of about 10%. The drivers will be ad rate increases, higher utilization rates for news and entertainment programs under the revamp, effective Jan 2013, and more special project revenue from state agencies/state enterprises (such as the Government Savings Bank, Government Housing Bank, the Post and Telegraph Department, etc). The firm targets income of Bt800m from special projects next year. MCOT recently inked a contract with the Government Savings Bank for Bt250m to organize merchandising campaigns for it.
the Post and Telegraph Department, etc). The firm targets income of Bt800m from special projects next year. MCOT recently inked a contract with the Government Savings Bank for Bt250m to organize merchandising campaigns for it.