BEC World

Clearer business plans. New look of digital TV programs from 4Q14 on BUY

BEC World Plc (BEC)

- 3Q14 net profit falls 8.1%qoq

3Q14 net profit fell by 22.3%yoy. Operation cost from digital Channel 3 had been booked

since mid-2Q14, increasing BEC’s overall expense and negating 3.4%yoy growth in

advertisement revenue. Compared with 2Q14, 3Q14 net profit fell by 8.1%qoq. Although

revenue rose by 3.9%qoq, operation cost from digital Channel 3 was fully booked for the

first quarter in 3Q14, raising SG&A by 15.4%qoq.

- Legal issue cleared. Aggressive investment on digital TV channels from 4Q14 on

The lawsuit between BEC and the NBTC had come to an end before the Central

Administrative Court on October 8, 2014. BEC Multi-media (BEC's subsidiary) was

permitted to simulcast analog Channel 3 (Bangkok Entertainment) via "real-time pass

through" scheme (like Channel 7 and Channel 9). BEC has also benefited from five-year 4%

waiver. Therefore, BEC have clear business plans now, ready for new look of digital TV

programs from 4Q14 on. Also, set-top-box subsidy distribution would increase audience

volume of digital TV. BEC will start selling its advertisement space in bundle (for both

analog TV and digital TV channels) in 4Q14, so its advertisement revenue is expected to

grow from 3Q14. However, as BEC's SG&A tends to peak in the fourth quarter, 4Q14 net

profit is expected to stay flat from 3Q14. 9M14 profit made up only 71.4% of FY2014 net

profit forecast. Therefore, we revise down BEC's earnings forecast by 5.9% in 2014 and

8.9% in 2015; BEC's net profit is estimated to drop by 19.6%yoy to B4,491m in 2014, and

then rebound by 7.9% in 2015.

- To rebound in 2015. BUY

BEC's business plans have become clearer now, and advertisement revenue is expected to

boost BEC's profit in 2015. We switch to use FY2015 fair value (DCF) of B57, implying

15.4% upside. Dividend yield is projected at 4.3%p.a. We reiterate BUY.