Bec World (BEC)

Bec World Plc (BEC)

2Q13 profit grows 14.3%yoy from advertising rate hike and program reshuffle
2Q13 net profit made a new high at B1,422m, growing 14.3%yoy and
2.9%qoq, slightly lower than our projection. Advertising spending in 2Q13
increased 6.9%yoy, versus our projected growth of 9%yoy; the disappointing
growth resulted from the very high advertising spending in June 2012 from
broadcasting of the European Football Championship. Nevertheless, the
advertising spending growth in 2Q13 was contributed by a lot of factors,
including an increase of advertising rate for some air time, a cancellation of an
afternoon Chinese drama series “Tam Nan Rak Dok Mei” and replacing it with
a new TV program, Krua Khun Toi, which gives better advertising rate, an
expansion of air time of programs with high advertising rate, and broadcasting
of new seasonal reality shows in 2Q13, such as Miss Country Girl, The Voice
Kids, and Thailand’s Got Talent Season 3. Gross margin has shifted from
52.5% in 2Q12 to 53.9%, while SG&A/sales dropped from 11.5% to 11.1%.

- Advertising rate hike early 2013 will keep FY profit growth at 20% as projected
As a TV station with the largest audience base in Bangkok and vicinity,
combined with its continuously developing of new programs to increase the
income base, including drama series, news, and seasonal programs during
weekend, the profit base tends to grow constantly. FY2013 net profit growth is
estimated at 19.9%. An approach of 24 digital TV channel biddings in August
– September this year, however, will fuel up competitions among TV business
and make advertising rate hike harder than in the present. Nevertheless, with
its readiness in terms of the audience base and the strength of content and
the capital, we believe BEC will win biddings for 3 digital TV channels, which
include an HD channel that will be used in broadcasting as a replacement of
the current analog system, a variety channel, and a children channel.
Increasing capacity from these 3 new channels will compensate for the harder
advertising rate hike as a result of the fiercer competition in the future, so
BEC’s profit would still be able to grow continuously after the official
commencement of the digital TV business.
- Upside is 30.5%; 1H13 dividend is B1.2/share. BUY.
The share price has previously declined until it has 30.5% upside from 2013
fair value, using DCF, at B78/share. In addition, BEC is going XD on 20
August, with 1H13 dividend of B1.2/share or a dividend yield of 2%. Buy.