MCOT

Above estimate

MCOT Plc

MCOT reported a Bt481m net profit for 4Q12, up by 264% YoY and flattish QoQ. The number was 7% above our estimate, thanks to lower service costs (mostly TV production costs) and employee expenses than modeled. Ad receipts were basically in line with our model. Total service costs were 8% lower than expected. GM was 60.6%; we had assumed only 57%.

Result highlights

The massive YoY jump in net profit was due to the low base set by 4Q11 flooding. Ad receipts rose, OPEX control was better and the headline corporate tax cut dropped 7%. TV ad income jumped 51% YoY but declined 5% QoQ. Radio ad receipts rose by 27% YoY and 9% QoQ. The YoY jump in TV ad revenue was led by a higher TV loading factor—80% in 4Q12 against 48% in 4Q11. Radio ad revenue expansion was led by clustered sales and the bundling of marketing events with ad sales.

Outlook

MCOT estimates a 10% rise in total ad spend and a 12-13% increase in TV ad spend for FY13. The firm targets 15-17% YoY revenue expansion this year, the drivers being: 1) a 20% YoY rise in TV ad income (excl. satellite TV), 2) a 60% YoY jump in govt special projects (to Bt800m) and 3) 18percent satellite TV revenue growth (to Bt400m).

The firm plans to bid for two digital channel licenses in 4Q13 (it estimates the reserve price at Bt500m per channel) and guides for total CAPEX of Bt4-5bn for the period FY13-15: 1) Bt1-1.5bn to bid for two digital channel licenses, 2) Bt1-1.5bn for investing in the 50-rai Ratchada junction project (assuming a tie-up with a strategic partner) and 3) Bt1bn to invest in digital transmitters and equipment, assuming a tie-up with four partners.

With regard to the 50-rai project, the firm plans to build a mixed-use media complex with retail and residential zones. But it has yet to recruit a strategic partner to fund the bulk of the cost. MCOT will limit its investment to Bt1-1.5bn plus the land. For the digital network investment, it plans to form a consortium with TOT, TPBS and the Public Relations Department to share network investment costs. It will also propose that the Royal Thai Army to join the consortium. An MOU has already been signed with TOT to use its network.

What's changed?

We maintain our FY13 profit forecast unchanged.

Recommendation

Our BUY rating stands, premised on strong FY13 earnings growth and scope for upside from digital network and channel licenses.