Brokerage houses gloomy about prospects for RS

Ayudhya Securities said in a report that RS was unable to get big sponsors for the Euro 2008 football tournament, for which it has been awarded all media rights in Thailand.

This led the brokerage house to lower its forecast of RS's revenue from the tournament from Bt380 million to Bt250 million. It expects RS will rack up losses from the tournament, because it paid Bt270 million to 300 million for the media rights.

Although main revenue will recover in the rest of the second quarter after recording a net loss of Bt67 million in the first quarter, Ayudhya said it had revised its estimate from a net profit of Bt120 million to a net loss of Bt62 million.

The company has not yet booked compensation of Bt50 million for the cancellation of a show by magician David Copperfield.

RS's net loss in the first quarter was due to a decline in the entertainment market in the first two months of the year. Revenue dropped in all its businesses except digital and In-Store media. Meanwhile, the gross profit margin decreased significantly because most costs of operations are fixed.

Ayudhya also revised down RS stock's fair value from Bt3.17 a share to Bt2 and changed its investor recommendation from "trading" to "sell".

Globlex Securities supported Ayudhya's forecast, saying that although sport is RS's flagship business, its revenue was disappointing.

The company missed its sponsorship target for Euro 2008 because two of three main sponsors withdrew, cutting the company's revenue from Bt500 million to Bt200 million, Globlex said.

"It's a possibility that RS will lose from this business, though we once expected the company would post a profit of around Bt100 million," the securities house said.

Globlex also revised its forecast of RS's net profit from Bt188 million to a net loss of Bt135 million.

The broker estimates that RS's core business revenue will decrease this year because of the decline in the popularity of some of its artists. The brokerage house forecasts that the company will lose revenue from at least four television programmes, due to a revision in Channel 7's scheduling in the third quarter.

Globlex lowered its fair value estimate of RS stock from Bt3 to Bt2 per share and changed its investor recommendation to "Sell".