Plan B Media

Plan B Media Plc (PLANB) 

 

Investment thesis

Expectations of strong earnings growth momentum throughout 2015, together with PLANB’s robust earnings growth profile—67% net profit growth based on CAGR during 2014-16—driven by revenue and gross margin expansion, should, in our view, prompt further share-price gains. More interestingly, there is also scope for upside to its long-term earnings from future investments and M&A opportunities, as the company reiterated that it is debt-free, which should facilitate such spending without difficulty. 

Revenue growth outperformed the industry in 2015YTD  

The Thai media industry has broadly recovered in 2015 YTD since last year’s political unrest—total ad spend during 5M15 rose 26% YoY to Bt57bn, led by substantial growth in digital TV media. Scoping down to the Out-of-Home (OOH) media sub-sector (outdoor, transit, and in-store media), the ad spend in the OOH media sub-sector grew 2% YoY to Bt3.8bn over the same period—16% YoY growth to Bt1.6bn for transit media; a 4% YoY rise for outdoor media to Bt1.7bn, and a 33% YoY contraction to Bt419m for in-store media (Figure 1). Even though the overall ad spend in the OOH media sub-sector expanded marginally during 5M15, PLANB’s revenue growth is expected to outperform the industry significantly—we expect the firm’s revenue to escalate by more than 30% YoY during the period.  

Earnings for 2Q15 to advance 

We expect PLANB to post a 2Q15 net profit of Bt106m, up 111% YoY and 96% QoQ. Note that there was a one-time expense related to its IPO of Bt11m booked in 1Q15. The 2Q15 core profit is also expected at Bt106m, up 111% YoY and 63% QoQ (Figure 2). 

The key drivers for the substantial core earnings growth were: 1) greater utilization rates of existing media (ad spend recovery since the lowest season in the first quarter), 2) revenue recognition from new projects in 2014 and 1Q15 (PLAN B TV; Chiang Mai city network; MRT digital walls, PIDs, PSDs, handgrip and bench displays; large digital displays at Central shopping complexes across Thailand; in-mall media at Siam Paragon), 3) revenue recognition from new projects in 2Q15 (digital outdoor media at The EM District, mall media at EmQuartier, Flyover 2.0 and Gateway Phase 2), 4) revenue sharing from Hello Bangkok LED (started in May) and 5) lower interest expenses (as the firm used IPO proceeds to repay debt). 

Strong profit expansion to sustain momentum through 3Q15   

The lowest season for the OOH media sub-sector in the first quarter of each calendar year is already behind us and the ad spend in the OOH media sub-sector normally increases in the following quarters (see Figure 3). As such, PLANB’s strong earnings growth momentum (both YoY and QoQ) is expected to sustain through 3Q15, driven by rising utilization rates of existing media, the launch of new projects (Udon Thani City Network and bus Wi-Fi), a full quarter of revenue sharing from Hello Bangkok LED and lower interest expenses.