Plan B Media

Plan B Media Plc (PLAN B) 

 

We like this entry into the football business and believe it will add both earnings and value. Though it is too early to put into our model, a workup suggests that at a minimum (i.e. no improvement over SPORT), this deal can add 5% of our 2017F. Achieving its target revenue of Bt800mn could add Bt200mn profit 25% of our 2017F forecast. PLANB is looking at high earnings growth even without this deal and we maintain Buy with DCF-based target price of Bt8.5.   

 

Positive tone at the meeting: PLANB presented its new business at an analyst meeting yesterday. This is a 4-year contract (1/1/2017-31/1/2020) as the agency to get sponsors for the Football Association of Thailand and Thai Premier League, for which it will pay Bt510mn/year and a share of the revenue. In return, it gets a management fee on all income. We are like this deal and believe it is value accretive. Key takeaways:  

 

 PLANB targets ~Bt800mn in revenue in 2017 – well above the Bt458mn reported by the previous agency, Siam Sports Syndicate (SPORT). Revenue will come from four areas. First is sponsorship, the biggest contributor at ~51% of the incremental revenue in 2017. PLANB will raise prices for current sponsors and add new ones. Second (about 24.8%) will be from selling more merchandise (neck-scarf, T-shirts, etc.). Three is providing content online and four is marketing events (Figure 1). 

 

 Management fee (i.e. revenue share kept by PLANB) ranges from 15-25% depending on revenue generated (Figure 2). It can take the 15% management fee off the annual minimum guarantee of Bt510mn even if it gets no revenue.  

 

Deal creates value. We believe this deal will be both earnings and value accretive to PLANB from the start, as illustrated below.  

 

 As a base-case scenario, we assume that PLANB can in its first year (2017) do no better than SPORT, which reported revenue of Bt458mn in 2015. After setting aside 80% of that as its revenue share with the Association (Figure 2), PLANB is left with Bt91.6mn (20% of Bt458mn) as its share. Since this is below the minimum guarantee, PLANB has to make up the difference, in this case Bt52mn (Bt458mn minus Bt510mn). This gives it revenue of Bt39.6mn (Bt91.6mn minus Bt52mn), which goes straight to the bottom line as it carries no cost, and is equivalent to 5% of 2017 earnings. 

 

 In the best-case scenario, assume PLANB generates its goal of Bt800mn revenue. As seen in Figure 2, at this level of revenue, revenue share goes down to 75%. This implies earnings of ~Bt200mn or ~25% of 2017 earnings.   

 

While we do believe this deal is earnings and value creative for PLANB, it is far too early to quantify how much it will add and we thus leave it only as upside. 

 

Maintain Buy with unchanged TP of Bt8.5: We reiterate our Buy on PLANB, which we see as a growth stock with 35% earnings CAGR in 2016-18. Once benefit from this contract is quantifiable and in our forecast, earnings growth should be even stronger.