Plan B Media

Plan B Media Plc (PLANB)  

 

PLANB is bidding for a new contract involving finding sponsors for sports events. Our study leads us to believe this business is value-accretive, assuming PLANB gets it at a decent price, adding ~7% to our 2016 earnings estimate. We reiterate our Buy call on PLANB as a growth stock with 35% earnings CAGR in 2016-18 (without the new contract). Our DCF-based TP is Bt8.5.  

 

What’s new: Management tells us PLANB is participating in the auction for the rights to act as official agency to find sponsors for the Football Association of Thailand. The winner of the contract is anticipated to be announced on April 22 (this Friday).         

 

Implication: As the auction is ongoing, the firm prefers not to provide much detail about its bid and expected revenue, including profitability. What it did say is this:  

 

1) The contract PLANB is bidding for involves finding sponsors for the Football 

 

Association of Thailand to support the national football team and Thai Premier League; the contract term is four years. 

 

2) Revenue and cost structure: the firm will receive revenue from the sponsors and pay a portion of that revenue plus a minimum guarantee (unspecified) to the Football Association of Thailand.  

 

3) The firm seems confident that this new business will mesh well with its current activities, given the wide variety of clients it already has who will be potential sponsors for these events. This would raise revenue and profitability. 

 

4) The other bidders are Index Creative Village and Dentsu Media Thailand. 

 

Since PLANB preferred not to provide detailed information, we researched to assess the upside if it does win the contract. We find that Siam Sport Syndicate (SPORT) has been the sole company handling this for the Football Association of Thailand, but the contract was voided on March 9, 2016, as it was determined to have been awarded improperly. According to information SPORT filed with the SET, it gained ~Bt885mn in revenue from this contract with earnings contribution of Bt40mn in 2015.  

 

The big difference between SPORT’s contract and the contract PLANB is bidding for lies in broadcast rights. After ending the monopoly held by SPORT, the Football Association of Thailand will split its contracts into two: one to find sponsors for broadcasting (main sponsor is True Vision) and one to source sponsors for other events (big names on these are Toyota, ADVANC, Chang and Coca Cola). PLANB is bidding for the second contract which it believes offers better profit potential. This coincides with our research, which indicates that the broadcasting side is only minimally profitable. If this is true, it suggests most of SPORT’s earnings from rights management came from sponsors of other events, the arena for which PLANB is bidding. If we assume PLANB can do only as well as SPORT, this contract adds ~7% to PLANB’s 2016 earnings.  

 

Action: We reiterate our Buy on PLANB, which we see as a growth stock with 35% earnings CAGR in 2016-18. This will be even higher if it gets this contract.