Mono Technology

Mono Technology Plc (MONO)

Investment thesis
On Friday, MONO told the SET that it had signed a Regional Marketing Partnership Mobile Agreement with Liverpool Football Club. The contract length is three years (May 2013 to May 2016). We think higher content costs will squeeze GM somewhat during the initial start-up period, as costs will jump immediately, while sub acquisition will be more gradual. However, we feel positive about the deal—it should help MONO expand its customer base. We will factor in the incremental value from the contract once there is clarity over revenue and cost of content. For now, we have trimmed our full-year earnings forecast by 2% to Bt780 (up 28% YoY) to factor in additional content costs in 2Q13. Our BUY rating stands.
The deal with Liverpool
The contract with Liverpool gives MONO exclusive rights to publicize information about Liverpool via SMS and MMS, to use the designation “Official Regional Marketing Partner of Liverpool Football Club in Thailand”, to publish news via the internet and to arrange marketing activities with Liverpool (see details in Figure 1). Liverpool has the second-largest Thai fan base of the teams in the English Premier League (EPL) with 14m supporters. A substantial percentage of them can be expected to eventually sign up for the SMS/MMS service.
Profit and target price accretions
We guestimate the cost of the three-year contract at Bt300m, which is the rate that Liverpool had with 3K Battery in 2012. If MONO were to recruit only 10% of Liverpool supporters (1.4m) to buy subscriptions, we would roughly estimate the additional MVAS revenue at Bt200m/year and the profits accretion at Bt50m, a Bt0.7 increase to our target price (EPS up Bt0.36). Note that IVAS income should also benefit—the contract allows the firm to publish news via the internet. As such, viewership of MONO’s website should rise, which would enable it to charge higher advertising rates.
2Q13 preview
We estimate 2Q13 earnings of Bt170m, up 15% YoY but down 5% QoQ. The top-line should post a YoY and QoQ increase to Bt420m, led by rising subs from True. We expect that GM declined QoQ, due to somewhat higher costs as a result of Liverpool contract. The period from the third week of May through to the second week of August is off-season for the EPL, so we don’t expect many new Liverpool subs through those months, but costs have to be booked. The SG&A/sales ratio should have risen, as the MVAS service in Vietnam started operating in April.
With regard to the FY13 outlook, we have trimmed our full-year earnings forecast by 2% to Bt780m to factor in additional content costs in 2Q13, but our FY14 profit projection of Bt966m and YE14 target price of Bt14 stand unchanged.