MCOT

Local NDR

MCOT Plc

Investment thesis

We took MCOT executives, Mr Jessada Promjart, CFO, and Ms Thanaporn Thaweepanich, IR manager, on a local NDR during Jan 29-30, 2013. The overall feedback from fund managers was broadly positive—anticipation of sustained strong recurring FY13 operations, especially TV business, and the firm's plan to apply for NBTC digital terrestrial TV licenses (which includes facility, network and channel licenses). Our BUY rating stands, premised on: 1) solid FY13 earnings, 2) scope for upside from digital TV licenses and 3) a moderate dividend yield of 5-6%.

YE16 targets—16% audience share & 71% in-house programming

The CFO has set two four-year targets for the TV business: 1) a YE16 audience share of 16% (up from 8.4% at YE12) and 2) YE16 in-house programming of 71% (up from 47% at YE12 and 51% at YE13). We believe expanded in-house programming would mean upside to ad revenue and scope for future cost reductions.

Auctioning of commercial channel licenses in July-Aug

The NBTC compiled draft regulations and auctioning rules for 24 commercial digital TV channels on Feb 4, 2013. The next step is commission approval on Feb 13 ahead of a public hearing and the publishing of an Information Memorandum (IM) in March or April. The NBTC will hold spectrum auctions and issue 24 commercial digital licenses during July-August. Note that it will issue digital network and facility provider licenses in April 2013 (these license types won't be auctioned). MCOT aims to acquire one digital facility provider license, two digital network provider licenses and bid for 3-5 commercial channel provider licenses.

FY13 revenue growth target of 14%

The CFO targets Bt6.5bn in FY13 revenue, up 14% YoY, led by a 20% rise in TV revenue. However, FY13 concession and radio revenues should be flattish. TV revenue (excl. satellite TV) in FY13 will grow by 20% and revenue from government special projects will jump 80%. Satellite TV revenue in FY13 will rise 18%.

Estimate a robust jump in 4Q12 net profit

We estimate a Bt450m net profit for 4Q12, up a robust 240% YoY but down 6% QoQ. The massive YoY jump is due to the low 4Q11 base comparison caused by the flooding, greater ad revenue and well-controlled OPEX. TV ad revenue in 4Q12 will jump 53% YoY, while radio ad revenue will rise 22% YoY.

YE13 target price upgraded 14% to Bt60

We have upgraded our YE13 target price by 14% to reflect the FY14-20 earnings upgrades and a higher perpetual terminal growth assumption of 5%, up from 4%.