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. We therefore maintain our BUY rating and rolled over our investment horizon to YE16 with a target price of Bt7.70.

Robust revenue growth in YTD 2015 … outpacing the industry  

The Thai media industry has gradually picked up to date in 2015 since last year’s political unrest—total ad spend during 9M15 increased 6% YoY to Bt81bn, led by massive growth in digital TV media (up 1,029% YoY). Scoping down to the Out-of-Home (OOH) media subsector (outdoor, transit, and in-store media), the ad spend in the OOH media subsector contracted 1% YoY to Bt6.9bn. Within the OOH media subsector, transit media posted the strongest growth of 20% YoY to Bt3.2bn, followed by outdoor media (up 5% YoY to Bt3.1bn). In contrast, the in-store media ad spend continued to shrink—dropping 59% YoY to Bt537m (Figure 1). Unlike the overall ad spend in the OOH media subsector, which contracted during 9M15, PLANB’s revenue growth is expected to outpace the industry substantially—we expect the firm’s revenue to jump 54% YoY during the period.   

Earnings in 3Q15 to expand substantially YoY  

We expect PLANB to post a 3Q15 net profit of Bt115m, up 192% YoY but down 12% QoQ. The 3Q15 core profit is also expected at Bt115m, up 192% YoY but down 12% QoQ (Figure 2). The key drivers for the considerable YoY earnings growth were: 1) greater utilization rates of existing media, 2) revenue recognition from new projects launched in 2015, 3) revenue sharing from Hello Bangkok LED (HELLO) and 4) lower interest expenses (as IPO proceeds were used to repay debt). 

But, the QoQ earnings contraction was due to: 1) lower low season transit media utilization rate (to 61% vs. 85% in 2Q15) and 2) slimmer gross profit margin (GPM, to 41.7% from 43.4% in 2Q15, from the weaker utilization rate of transit media and larger revenue sharing from HELLO, which yielded lower GPM). As 9M15E net profit forecast of Bt312m was 77% of our FY15 earnings forecast and the fourth quarter is normally ad spend high season. We thus expect a 10% upside to our forecast and that of the consensus.  

Strong earnings growth expected for 4Q15 with upside potential    

PLANB’s 4Q15 earnings are expected to expand significantly both YoY and QoQ. The key drivers would be: 1) higher utilization rates of existing media on the back of high season, 2) contribution from projects launched this year, 3) revenue sharing from HELLO and 4) lower interest expenses. Moreover, there is scope for upside to the firm’s earnings forecast from future investment projects and M&A opportunities both in Thailand and AEC markets.