MCOT plunges on policy reversal
Punters not pleased by firm's switch to more public-minded programming
MCOT Plc's stock yesterday dived 5.13 per cent to an 11-month low as selling pressure mounted in response to the media company's announced switch to a social-benefit orientation from its financial-performance focus.
The stock started the day with a tumble and headed further south to the day's trough of Bt27 before recovering marginally to close at Bt27.75.
MCOT's stock has been at the centre of the selling spree on the bourse, losing 17 per cent of its value since president Mingkwan Saengsuwan and other board directors resigned on September 26 to take responsibility for broadcasting prime minister Thaksin Shinwatra's declaration of a state of emergency from the US during the coup.
The firm sold its initial-public-offering shares for Bt22 each late in 2004.
Spokesman and director Wittayatorn Tokeaw called an urgent press briefing late yesterday to soothe market jitters, saying MCOT remained committed to social benefits as well as its bottom line.
"It is only about principles; we didn't say which programmes would be removed. We just want a greater variety of content," he said.
MCOT's board will meet on Friday to discuss revised programming, he said.
"We think that MCOT's shares will go up if new programmes are launched as they will meet viewers' expectations," he added.
In a bid to prop up the company's stock, he said MCOT's executives would meet with institutional investors after the board meeting.
The company will keep its dividend pay-out ratio unchanged if earnings meet target, he said. Its latest dividend pay-out was 80-90 per cent of net profit.
Kim Eng Securities (Thailand) has downgraded its recommendation for MCOT from buy to sell after acting president Pongsak Payakvichien said on Thursday that the company's priority was social contribution, not profit as it had been in the past.
With Mingkwan at the helm, the company adopted a strategy of concentrating on edutainment and financial performance, and MCOT's net profit leapfrogged from Bt977.50 million in 2004 and Bt1.10 billion last year.
Its first-half net profit jumped from Bt545.50 million last year to Bt710.70 million.
The broker said two popular MCOT TV offerings, "Kuy Kui Khao" news talkshow and "Kob Nork Kala", would be dropped from Modernine TV's schedule next year while another highly rated show, "Tung Look Tung Kon", would be cut.
MCOT's FM radio station, Met 107, has been recently revamped and is also expected to be reformatted again into a classical-music station, instead of an international hit-music channel.
The broker is concerned that the loss of the profitable programmes will wound MCOT.
"Kuy Kui Khao" and "Tung Look Tung Kon" contribute up to 7 per cent of MCOT's total revenues.
Purely educational programmes normally draw lower ad rates and audience ratings than entertainment or edutainment, the broker said.
In light of the programming changes, it has cut its 2007 earnings estimate for MCOT by 13 per cent to Bt1.23 billion, a 10-per cent decline year on year.
MCOT's fair value has been lowered to Bt28.50.
Pongrat Ratanatavanananda, vice president of Bualuang Securities, said investors would accept the new policy direction but the steep fall in MCOT's stock price could indicate that they were anticipating less attractive performance from the firm in the future.
Kiatnakin Securities has recommended investors to sell MCOT stock as the new policy to key in on social benefits rather than monetary benefits will handicap its profitability.
The reshuffling of its three popular TV programmes led the broker to cut MCOT's 2007 net-profit target to Bt1.06 billion, down 22 per cent from this year.
The broker has maintained its 2006 earnings forecast in the belief that the revised programming will be implemented early next year.
Supakorn Sujiwatwimol, assistant managing director of TSEC Securities, said that her brokerage had maintained a buy recommendation for MCOT as it was too early to estimate the impact from the policy change.
The broker has kept its net profit forecasts for MCOT this and next year at Bt1.43 billion and Bt1.5 billion respectively. MCOT's target price remains unchanged at Bt35.46.