MCOT

MCOT Plc

In line with our estimate
MCOT reported a Bt376m net profit for 3Q13, down by 22% YoY and 16% QoQ. Stripping out a Bt56m one-time provision for the Rai Som court case, core earnings would be Bt431m, down by 10% YoY and 3% QoQ. The result was in line with our estimate. Total ad receipts were 4% above our model. Gross profit was 4% below our estimate.
Result highlights
The core profit deterioration was attributable to a jump in service costs, which outweighed the effect of a marginal top-line increase and a lower headline corporate tax rate. Service costs jumped 16%, both YoY and QoQ, led by higher production costs—up by 33% YoY and 34% QoQ—related to the outsourcing of a TV program, Roi Mue Srang Muang, to a production house and the organizing of Thailand’s Broadcasting Exhibition 2013 (THAIBEX 2013), which made a Bt1m profit. 
TV ad receipts inched up by 1% YoY and 4% QoQ (above Nielsen’s estimate of a 3% YoY dip for MCOT), led by revenue from two special government projects and one project for the Ministry of Public Health. Revenue from special government projects in 3Q13 jumped 59% YoY. Income from new media was flattish YoY and QoQ, given the full sub-leasing of capacity of satellite transponders. The average TV loading factor was 82% in 3Q13, close to 2Q13. Radio ad receipts rose by 2% YoY and 1% QoQ, boosted by bundling marketing events with ad sales. SG&A was well-controlled—up 1% YoY but down 5% QoQ.
Outlook
Management reaffirmed better ratings in 3Q13, driven by the TV program revamp during the quarter—MCOT’s overall rating rose from 0.62 in 1H13 to 0.65 in 3Q13 and its prime-time rating from 1.37 in 1H13 to 1.56 in 3Q13. The firm has cut its FY13 guidance by 10% to Bt3.6bn for TV revenue and by 5% to Bt6.2bn for the top-line. It maintains its special govt project income target at Bt800m for FY13 (up 100% YoY) and expects Bt4bn in TV ad revenue for FY14 (up 10% YoY), led by a Jan 2014 program revamp and 1-2% radio ad growth.
We think that management’s FY13 new top-line target of Bt6.2bn—up 8% YoY—looks too optimistic, given that 9M13 revenue inched up only 1.2% YoY. We estimate a Bt447m 4Q13 core profit, down 7% YoY but up 4% QoQ.
What’s changed?
We have trimmed our earnings forecasts by 3% to Bt1.64bn for FY13 and by 9% to Bt1.71bn for FY14 to factor in the slowing economy and the unfavorable political climate. Our DCF-derived YE14 target price declines to Bt37.
Recommendation
Our TRADING BUY rating stands, premised on a generous yield of 7%.