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GMM Grammy
SCB Securities has maintained its "outperform" recommendation on GMM Grammy, with a target price of Bt7.80 per share, based on estimated 2007 core earnings per share and a price/earnings ratio of 15.
Grammy has had a better gross margin in its music business, both year on year and quarter on quarter, despite a drop in recording sales in the third quarter compared with the same period last year. The first nine-month gross margin on recording sales was 46 per cent, and the fourth quarter is generally its peak for music sales and therefore margin.The brokerage sees little upside in music sales next year. It estimates overall growth in music sales of 5-6 per cent, with higher e-business and copyright sales sufficient to make up for lower recording sales. The brokerage expects little contribution from Grammy's new businesses. These include a new downloading service for full songs or albums via mobile phone, which started in the third quarter. Although Grammy believes this service will help bring overall annual e-business revenue growth of 15-20 per cent, there will be little upside, because prices are set too high, and piracy remains rampant. Another new business is the firm's international expansion, but this has only just begun and is expected to add little to overall music sales next year.
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