VGI Global Media

VGI Global Media Plc (VGI)

Investment thesis
Despite its 10% QTD share price increase, we believe VGI’s outperformance will continue. Solid QoQ earnings growth and anticipation of the stock being added to the MSCI Small Cap Index and the SET100 will build further sentiment. We have revised up our FY14/15 earnings forecast by 4% on expanded expectations for sales of bundled ad packages (BTS plus in-store & buildings). As such, our target price rises from Bt149 to Bt153. The current share price implies a YE13/14 PER of 31x and PEG of 0.5x, slightly below mean sector PEG of 0.6x. There is also scope for upside from the firm winning a new advertising space management contract for the On-Nut-Bearing BTS extension route.
Management targets sales growth of 30% for FY13/14
The target is in line with our model of 31%. We expect growth across all media categories. Transit media revenue should rise 20% on the commercial run of 35 new bogies and higher priced ad space packages in Oct. In-store media revenue is likely to post the strongest growth of 40-50% on rising occupancy rates for ad spaces in hypermarkets (Tesco Lotus and BigC). VGI expects revenue from advertising space in office buildings and other media to rise 20%, driven by higher ad rates and new ad space management contracts for office buildings and for mega-LED screens.
QoQ earnings uptrend through to 3Q13/14
1Q13/14 profit should post QoQ growth from the low base set by low season in 4Q12/13. We expect another QoQ rise in 2Q13/14 on increasing ad revenue from BTS and modern trade (seasonality) and anticipation of normalizing mega-LED screen revenue (the maintenance to a flyover in front of an LED screen on Rama IV Road that discouraged clients from booking space finished in mid May). Profit looks set to peak in 3Q13/14, as 35 new bogies will start generating ad revenue during the quarter (later than we had initially anticipated of 2Q12/13). The firm also plans to increase sales prices for both bundled packages and all individual media categories in October.
FY14/15 earnings forecast upgrade
We have revised up our FY14/15 earnings forecast by 4%, as we now expect sales of bundled ad packages (BTS plus in-store & buildings) to generate more revenue than we did previously. We anticipate that revenue from BTS stations will rise to around Bt1.3bn (our previous assumption was Bt1.1bn). As such, we have upped our FY13/14 DCF derived target price to Bt153 to reflect our forecast changes. Note that there is scope for upside to our model from an additional ad space management contract for the On Nut-Bearing route. Management guides that the terms of the contract with the BMA will be comparable to that with BTSC and that it will be signed soon.