BEC World Bualuang Securities

BEC World Plc

 

Investment thesis

Sustained weak domestic consumption and ad spend have continued to dampen BEC’s 4Q15 earnings. However, we believe that its FY16 earnings outlook will recuperate modestly, based on its revenue rise, in tandem with consumption recovery (which will be mostly offset by the higher OPEX at its three digital TV channels). Due to the narrower valuation gap, we have changed our rating from SELL to HOLD. Despite the stock being oversold, it is too soon to re-accumulate or make a re-entry, pending an obvious earnings recovery.     

Insights into 4Q15—earnings drop 

We estimate a Bt780m net profit for 4Q15, down 22% YoY and 4% QoQ. The tumble is spurred by less ad revenue (poor consumption) and heavier OPEX for three channels (programming, production and staff). We assume Bt3.5bn in ad revenue for 4Q15, down 8% YoY and 2% QoQ, slightly higher than Nielsen’s 4Q15 estimate of 12% YoY and 2% QoQ drops). An 8% YoY drop in 4Q15 (close to a 10% YoY drop in 3Q15) reflects the sustained weak economy and the NBTC’s digital channel change in Dec. Its 4Q15 ad income is the lowest since 1Q13. 

We estimate GM of 38.8% in 4Q15 (43.1% in 4Q14 and 39.2% in 3Q15). As BEC has passed the business segment for overseas artist concerts to its affiliate (LIVE Nation BEC-Tero) since July, we expect its revenue from concerts and shows to drop 18% YoY but its GM from that segment will rise to 30% in 4Q15 (22.8% in 4Q14 and 27.9% in 3Q15), led by a lack of consolidation of low-margin overseas concerts.

Ratings of super-prime Thai soap operas (SPSO) slid in Dec-Jan

BEC’s rating (4 years+ nationwide) for its HD Channel (simulcast with analog channel) has started to pick up since Oct (from 1.798 in Sep to 1.972 in Oct and 2.064 in Nov) before falling to 1.876 in Dec (due to the NBTC digital channel slot changes). Its HD (analog) rating gain during Oct-Nov came from the higher SPSO ratings, after its rating drop during Aug-Sep 2015. The revamp of SPSO via outside production houses, such as Kantana Group, has yielded positive results. 

Although its mean rating of SPSO has bounced back 5.9-6.1 during Oct-Nov (bolstered by Hong Hoon), it fell back again to 5.4-5.6 during Dec-Jan (dragged by weak ratings (4-5) of two weekend soap operas, Plub Peung See Chom Poo and Dok Mai Tai Mek). Channel 7’s Thai soap opera mean rating has been stable at 5.8-6.1 during Nov-Jan, led by Morasoom Sawad (8-9). We think that BEC’s weekend Thai soap operas have so far remained a problem.  

Sustained ratings for Family and SD channels 

Its ratings for SD Channel have sustained at 0.18-0.22 while those of Family Channel have stayed at 0.11-0.14 during Jul-Dec 2015. We think that its added live sports content and the Thai soap opera reruns have helped it to sustain ratings at both channels. However, their revenues remain negligible at Bt100m/quarter altogether.