Target price : Bt20.10
Recommendation : BUY
Closing Price (19 May 09) : Bt17.40
First quarter net profit increased by 25.31% and was better-than-expected
by 18.76%
- Revenue for the first quarter rose by 10.65% YoY attributing to growth of the TV revenue and JV business. Meanwhile, costs and SG&A were well under control thereby enhancing profitability. Net profit grew by 25.31% YoY to Bt293.01m against our projected figure of Bt267.01m.
- Outlook for the second quarter is set to be bright along with still high ad utilization, program development, ad sales in radio stations, ad price hike on some programs and concerts.
- The impact from the Frequency Allocation Act should come in next year and we thus increased our profit forecast for MCOT for this year from Bt1,096.47m to Bt1,148.90m. The target price has also been increased to Bt20.10/share. 'BUY'.
First quarter profit increased by 25.31% and is considered to be better than expected
Total revenue for the first quarter increased by 10.65% YoY to Bt1,004.82m, which was better than expected. The growth was from TV business that improved 15.77%. Ad utilization rate rose to 91% comparing to last year when the nation mourned over the death of HRH Princess Galyani Vadhana. There was also ad price adjustment during eh weekend sitcom, as well as news time. The company also adjusted the program slots. Meanwhile, revenue from special projects and other including SMS and MCOT X-PRESS has increased. Revenue from radio business increased by 0.45% and from JV business by 18.83%. Costs rose 7.81% but SG&A declined by 1.49% with good control over charges. In sum, its net profit recorded at Bt293.01m, increasing by 25.31% YoY and better than our figure of Bt267.01m
Second quarter outlook remains good
Ad utilization for the TV business will remain bright looking into the second quarter. This is due to large advertiser like Unilever transferring its ad budget from Channel 7 to other channels following dispute over ad rate reduction. It remains to be seen whether a compromise would be made or not. Moreover, MCOT is also trying to develop more programs during various time slots and to host concert events, particularly in June, in order to boost revenue. The radio stations have been bundled into clusters instead of selling them individually in order to gain improved ad sales. The company also adjusted up ad rate during the morning news with the Nation since Apr from Bt50,000 to Bt100,000/min. As second quarter 2009 profit was extremely high, it remains a challenge whether 2Q09 profit will record a positive growth YoY.
Other issues need to be monitored further
There are various other issues, both positive and negative, that need to be monitored further: 1) Contract adjustment with True Visions, allowing it to air commercials. Preliminary talk is that revenue sharing to MCOT will stand at 6.5% of ad revenue. A clearer picture is expected by the third quarter. 2) The appointment of a new president whereby the process has been extended by a month to Jun 15. The outcome will likely be known by Aug. 3) The Frequency Allocation Act is expected to become effective next year. According to MCOT's rough assessment, it would have to pay approximately Bt70-80/year in licensing fee, revenue sharing from BEC at Bt79m for 2010 and contribution into the fund at no more than 2% of ad revenue. 4) The development of 50 rais near its HO is a new issue. The initial stage will comprise of a hall for hosting of MCOT and general activities. It is still under study whether the project will be sole owned by MCOT or a JV, the outcome that is expected in the last quarter. Such project is aimed at compensating revenue loss from the upcoming act, as well as the contract expiration with True vision and BEC in the future.
We have revised up 2009 projection due to delay of the Frequency Allocation Act
The impact from the Frequency Allocation Act should come in next year and we thus increased our profit forecast for MCOT for this year from Bt1,096.47m to Bt1,148.90m. The target price has also been increased to Bt20.10/share and we maintain 'BUY' rating on the stock.
By Phillip Securities (Thailand) Plc. on May 20, 2009
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