BEC World

BEC World Plc (BEC)

5% below our expectation
BEC reported a Bt1.42bn net profit for 2Q13, up by 14% YoY and 3% QoQ (the firm set new records for both revenue and earnings). The result was 5% below our estimate, due to lower ad receipts and higher SG&A expenses than modeled. Ad income was 2% below our expectation, but revenue from concerts and shows was 55% higher than we assumed. GM was 53.9% (our estimate was 54.8%).
Result highlights
The YoY increase was due to stronger ad revenue, good OPEX control and the headline corporate tax rate cut to 20%. The QoQ rise was led by seasonality (the impact of which was softer than in previous years). Ad revenue rose by 7% YoY and 6% QoQ (slightly lower than Nielsen’s estimate of a 9% YoY rise), underpinned by ad rate increases for one non-prime show in May 2013 and 30 shows in Jan 2013 and the re-claiming of free Thai opera re-run minutes, starting 2Q12.
Revenue from concerts and shows dipped 3% YoY (in 2Q12, Lady Gaga played) but jumped 108% QoQ (driven by Phantom of the Opera and several concerts). The GP of concerts and shows dived 36% YoY but rose 70% QoQ. Overall OPEX remained well-controlled. Equity income from BEC Tero’s affiliate in Myanmar was Bt13m, stable QoQ.
Outlook
The firm extended the broadcasting time for super-prime Thai opera slots by another 15 minutes to 2.30 hours (8.15-10.45pm, daily), effective July 2013, due to sustained strong ad demand growth. New TV shows in 3Q13 include Thai Fight, The Voice Season 2 and Thailand Dance Now. Assuming that demand among advertisers remains strong in 2H13, we expect 2H13 ad revenue to rise HoH, augmented by non-prime slots and the re-claiming of free minutes in several slots. We estimate a Bt1.5bn net profit for 3Q13, up by 18% YoY and 6% QoQ.
Management expects the launch of 24 commercial digital channels to start to impact on ad rates in their third year of operations. But as BEC’s viewership is dominated by urban middle- to high-income demographics, we suspect the negative impact may manifest when digital networks achieve 50% population coverage,
What’s changed?
We have trimmed our FY13 net profit forecast by 5% to Bt5.7bn to factor in slightly weaker 2Q13 earnings. Our YE13 target price declines 4% to Bt65.
Recommendation
Our TRADING BUY rating stands, premised on strong fundamentals.