Workpoint Entertainment

Workpoint Entertainment Plc (WORK) 

 

Investment thesis

We are more optimistic over WORK’s 2H15-FY16 earnings outlook, led by expanded digital TV revenue prospects, and bolstered by its rating rise sustainability and its potential digital rate hikes in 2H15 through to FY16. In light of these factors, we have upgraded our FY15-16 net profit projections and target price to reflect greater earnings expectations for 2H15 and the higher digital ad rate in FY16. The persisting weak ad spend climate has no negative impact on ad purchases at Workpoint TV Channel (Workpoint), based on stronger ratings and content. WORK remains one of our two digital TV picks in the next 6-9 months.

Its 15 year+ digital rating targeted at 1.5 by YE16 

The 18-hour rating for Workpoint (15 years+ nationwide) rose to 1.02 during Aug 1-16, up from 0.88 in Jul, led by volleyball live broadcasts, The Angel Season 2, higher ratings of the last 10 episodes of the Pra Pud Ta Chao series (ends September) and higher ratings of its existing shows before and after Prisana Sai Fah Lab and Ching Roi Ching Lan (the latter has been moved to Workpoint since July). It will focus more on stronger existing prime-time content in 2H15 and will add Thai boxing and super-prime Thai soap operas contents in 4Q15. The rating (15 years+) is targeted at 1.0 by YE15 and 1.5 by YE16 (led by new seasonal shows for every quarter in FY16). 

Bt50k/min mean digital ad rate targeted for FY16

We expect its mean net digital ad rate of Bt35-36k/min in 3Q15, up 6% QoQ from Bt33-34k/min in 2Q15, led by the reduction of free minutes especially for TV shows whose ratings exceed 3.0, effective July, the gradual expiration of long-term contracts in August, and the increased portion of separate sales—four TV shows in 3Q15 (Prisana Sai Fah Lab, Golden Microphone, The Angel 2 and Ching Roi Ching Lan against two shows in 2Q15). We expect a greater portion of separate sales in 4Q15 for the shows whose ratings exceed two and a reduced portion of the discounted packed sale to be below 50% (of total sales) in FY16. 

We also expect the firm to renegotiate with clients to revise up its cost per rating (CPRP) from the current Bt25k/30 seconds at the 0.6 rating to Bt35k/30 seconds at above 1.0 rating. It targets its mean net ad rate to jump to Bt50k/min in FY16, up 43% YoY. Its mean digital utilization rate is expected to sustain at 85% from 2Q15 through to November. 

FY15-16 earnings and target price upgrades 

We revise up our net profit projection for FY15 by 14% (to Bt252m) to reflect our expanded 3Q15 earnings expectations—Bt110m 3Q15 net profit (up 307% YoY but down 3% QoQ) against our previous Bt90m estimate—led by higher digital TV revenue and for FY16 by 19% (to Bt307m) to factor in the higher FY16 digital ad rate assumption (up 10% to Bt46k/min). Our new FY16 digital ad rate is more conservative than the firm’s Bt50k/min target. We thus raise our target price 9% (to Bt55).