17E TP Bt14.10
RS
Buy (17E TP Bt14.10)
Company Update
Close Bt13.00
Media & Publishing July 06, 2017
Earnings upgrade/Earnings downgrade/Overview unchanged Upward revision from H&B Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
0.182
0.337
119.8%
92.9%
KT ZMICO vs. consensus Share data Reuters / Bloomberg
RS.BK/RS TB
Paid‐up Shares (m)
1,009.94
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
13.00/386.00
Foreign limit / actual (%)
49.00/3.13
52 week High / Low (Bt)
14.40/5.95
Avg. daily T/O (shares 000) NVDR (%)
4,036.00 4.27
Estimated free float (%)
41.33
Beta
1.32
URL
www.rs.co.th
CGR
Anti‐corruption
n.a.
Anapat Wanuschaiyapruk Analyst, no 57076 [email protected] 66 (0) 2-624‐6289
Maintain Buy with new TP at Bt14.10 CH8’s rating soared 11% in June led by Sida‐Ram and this should be reflected in the 3Q17 financial performance. H&B business has continued improving and has now become an essential part of RS. We revise up our net profit forecast on a higher H&B sales forecast. Maintain Buy with a new 17E TP at Bt14.10. Better rating will yield better financial results in Q3 The rating of CH8 leapt 11% from 0.572 to 0.638 because of the success of Sida‐Ram that airs during primetime on Monday to Thursday with further support from flagship programs like news, boxing, and primetime drama series. However, the improved rating will not deliver better financial results in Q2 as it will take another 2 – 3 months, meaning that CH8’s revenue in 3Q17 should be a new high. We forecast CH8’s revenue in 2Q17 at Bt350mn, +24%YoY and +14%QoQ based on the same ad rate as in 1Q17 at Bt30,000/min and a higher utilization rate at 57% (1Q17 at 50%). We expect revenue in 3Q17 to rise further to around Bt400mn. Upward revision for H&B sales H&B sales in 1Q17 came out at Bt199mn while monthly sales in 2Q17 were around Bt100mn. Momentum remains in an upward trend as the latest monthly sales keep breaking records. We hence revise up our H&B sales forecast by 43% for 17E (from Bt703mn to Bt1,003mn) and keep the sales growth rate at 20% for 18E. Our new 17E sales forecast looks achievable as it implies monthly sales of Bt100mn with the assumption of none in October. We keep the gross margin assumption at 70% but there is upside of around 5% since the management believes that the margin can expand from economies of scale. Solid turnaround in 2Q17E We forecast core profit for 2Q17E at Bt83mn, a solid turnaround from a loss of Bt85mn last year and growth of 654%QoQ. We expect media revenue to be flat YoY due to lower revenue of radio and satellite TV and higher revenue from CH8. The gross margin should improve from 17% to 20% on the cost savings effort. For H&B, we expect sales of around Bt300mn with the gross margin at 70% as in 1Q17. Buy rating maintained RS’s share price peaked at Bt14.40 and plunged by 10% as investors started to take profit. However, we think this provides a Buy opportunity at a less demanding share price, which now implies 17E PER and PEG at 33x and 0.5x, respectively. We maintain our Buy recommendation with a higher 17E TP at Bt14.10 (from Bt11.00). Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) EPS growth (%) Dividend (Bt) BV (Bt)
2014 4,306 385 0.43 ‐15.2% 0.30 1.70
2015 3,729 120 0.12 ‐72.1% 0.10 1.78
2016 3,125 (191) (0.20) ‐264.4% 0.00 1.09
2017E 3,431 337 0.40 302.6% 0.00 1.48
2018E 3,950 628 0.65 64.3% 0.26 2.13
2019E 4,198 762 0.79 21.4% 0.32 2.66
FY Ended 31 Dec PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 34.48 8.15 7.66 2.3% 21.7% ‐21%
2015 107.62 19.40 7.32 0.8% 7.2% ‐43%
2016 ‐124.64 44.33 11.98 0.0% ‐7.4% 102%
2017E 32.88 12.87 8.78 0.0% 30.8% 65%
2018E 20.01 9.53 6.10 2.0% 36.0% 23%
2019E 16.48 8.51 4.89 2.4% 32.9% 2%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
Figure 1: CH8’s rating
Figure 2: CH8’s ad rate and utilization rate
1.4
(Bt/min)
Source: RS, KT Zmico Research
Figure 3: TV revenue
Figure 4: Radio revenue
2Q17E
1Q17
4Q16
3Q16
2Q16
1Q16
4Q15
Sat/cab channels
Source: RS, KT Zmico Research
Figure 5: H&B revenue and gross margin
Figure 6: Media revenue breakdown
300
76%
77% 300
74%
73%
250
69%
150 100
70 29
0.78
3,000
0.76
2,500
0.74
199 70% 70%
200
0.72 0.7
91
84 53
40
53
0.68
50
0.66
0
0.64
2,000 1,500 1,000 500
H&B
10% 0%
2Q17E
1Q17
4Q16
3Q16
2,354 1,908 440
2,089
2,052 1,809 455
401
659
359
766
938
1,049
2014
2015
2016
702
Gross margin
Ch8
Satellite TV
Source: RS, KT Zmico Research
Source: RS, KT Zmico Research
Figure 7: Media and TV gross margin
Figure 8: H&B revenue
40%
20%
47% 37%
319 324
1,445
326 294
2,540 332 300
1,734
1,908
2018E
2019E
0
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17E
50%
30%
(Bt'mn) 77%
350
50
2Q16
1Q16
Source: RS, KT Zmico Research
(Bt'mn)
40%
2017E Radio
(Bt'mn) 1,600
36% 30%
26%
30%
9%
35% 30%
18%
17%
20%
32% 26%
1,400
1,256
1,200
1,319
1,345
2019E
2020E
1,003
1,000
12%
800
10%
600
0%
400
‐6%
232
228
2015
2016
200 ‐10% 2013
2014
2015
2016
Media (TV+radio)
Source: RS, KT Zmico Research
2017E
2018E
2019E
0 2017E
2018E
TV
Source: RS, KT Zmico Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
2Q17E
CH8
3Q15
2Q15
1Q15
4Q14
3Q14
2Q14
1Q14
0
50%
1Q17
49 50 49
4Q16
95 103 89
3Q16
96 89 58 54 53 40
2Q16
50
176 112
60%
Utilization rate
1Q16
100
130
113
2Q15
150
226
1Q15
200
232 200 190 162
4Q14
175
3Q14
250
306
282 287
276
57%
(Bt'mn) 200 173 180 160 160 141 140 129 140 119 117 111 108 120 103 101 100 82 80 75 80 60 40 20 0
2Q14
350
1Q14
(Bt'mn) 400 300
4Q15
Ad rate
Source: AGB Nielsen, KT Zmico Research
350
3Q15
Jun17
Apr17
RS
4Q15
One
Feb17
Oct16
Dec16
Jun16
Aug16
Apr16
MONO
3Q15
WORK
Feb16
Dec15
Oct15
Aug15
Jun15
Apr15
Feb15
Dec14
0.0
2Q15
0.2
1Q15
0.4
4Q14
0.6
3Q14
0.8
2Q14
1.0
55% 40,000 52% 52% 50% 50% 50% 46% 35,000 45% 42% 41% 30,000 37% 32% 25% 25,000 20,000 15,000 10,000 5,000 0
1Q14
1.2
Figure 9: RS’s 2Q17E earnings preview Profit and Loss (Btmn) Year‐end 31 Dec Revenue Gross profit EBITDA Interest expense Other income Income tax Other extraordinary Items Net profit (loss) Normalized profit (loss) Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%)
2Q16 747 178 21 (18) 8 20 0 (85) (85) (0.09) 23.9 2.9 (11.4)
1Q17 752 243 168 (24) 14 (14) 45 47 11 0.05 32.3 22.4 1.5
2Q17E 864 337 267 (23) 10 (21) 0 83 83 0.09 39.0 30.9 9.6
% YoY 15.6 88.8 1,149.8 26.8 22.1 (203.4) n.m. 197.7 197.7 198.7
% QoQ 14.9 38.9 58.4 (3.3) (26.7) 46.1 n.m. 76.7 654.4 76.8
6M17E 1,616 579 435 (47) 24 (35) 45 130 94 0.13 35.9 26.9 5.8
% YoY (17.7) (3.1) 63.0 31.4 122.9 181.4 n.m. 493.2 329.0 596.9
2017E 3,431 1,400 1,046 (114) 30 (84) 45 382 337 0.40 40.8 30.5 9.8
% YoY 9.8 76.3 244.3 37.2 (8.2) (447.7) (49.4) 474.1 276.4 479.0
Sources: RS, KT Zmico Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
% 17E 47.1 41.4 41.6 40.9 78.8 41.5 100.0 34.0 27.9 34.0
FINANCIAL TABLE PROFIT & LOSS (Btmn) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Other income / exp. EBT Corporate tax Extra Items Non‐controlling Net profit Reported EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btmn) Cash and equivalents Accounts receivable Inventories Investment PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Paid‐up shares Shareholder equity Total liab. & shareholder equity CASH FLOW (Btmn) Net income Non‐cash adjustment Depreciation & amortization Change in working capital Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Others Cash flow from financing Net change in cash Free cash flow FCF per share (Bt) PROFITABILITY Revenue growth (%) EBITDA growth (%) EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%)
2014 4,306 (2,941) 1,365 (792) 1,652 (1,078) 574 (78) 23 519 (107) (44) (27) 341 0.38 385 0.43 0.30
2015 3,729 (2,707) 1,022 (875) 694 (547) 147 (81) 51 118 12 2 (10) 122 0.12 120 0.12 0.10
2014 382 1,101 107 5 2,698 289 4,582 8 5 2,838 1,026 1,743 4,582
2015 757 876 163 5 2,510 533 4,844 6 7 3,117 1,014 1,727 4,844
2014 368 0 1,078 (93) 1,354 (1,033) 0 (1,032) (293) 100 (311) (8) (512) (191) 321 0.33
2019E 1,123 870 124 4 2,384 591 5,096 962 225 2,516 1,010 2,581 5,096
2018E 628 0 551 (263) 916 (449) 0 (449) 6 0 0 0 6 473 467 0.48
2017E 9.8% 244.3% ‐302.6% 40.8% 30.5% 14.7% 11.1% 9.8% 20.0%
2019E 4,198 (2,225) 1,973 (954) 1,582 (563) 1,019 (96) 30 953 (191) 0 0 762 0.79 762 0.79 0.32
2018E 760 818 120 4 2,489 578 4,770 912 325 2,701 1,010 2,069 4,770
2017E 382 0 540 (342) 580 (440) 0 (440) 44 0 0 0 44 184 140 0.14
2016 ‐16.2% ‐56.2% ‐264.4% 25.4% 9.7% ‐5.3% ‐3.3% ‐6.1% 11.2%
2018E 3,950 (2,157) 1,793 (932) 1,412 (551) 861 (106) 30 785 (157) 0 0 628 0.65 628 0.65 0.26
2017E 288 711 113 4 2,591 552 4,259 762 469 2,817 1,010 1,442 4,259
2016 (102) 43 468 (1,029) (620) (611) 11 (599) 1,131 0 (100) (465) 565 (653) (1,219) (1.26)
2015 ‐13.4% ‐58.0% ‐72.1% 27.4% 18.6% 4.0% 3.3% 3.2% ‐10.5%
2017E 3,431 (2,032) 1,400 (894) 1,046 (540) 506 (114) 30 421 (84) 45 0 382 0.40 337 0.40 0.00
2016 104 648 130 4 2,691 563 4,139 718 469 3,080 1,010 1,060 4,139
2015 132 42 547 470 1,191 (666) 9 (657) (10) 0 (181) 33 (158) 376 534 0.53
2014 24.4% 102.3% ‐15.2% 31.7% 38.4% 13.3% 7.9% 8.9% 20.7%
2016 3,125 (2,331) 794 (959) 304 (468) (165) (83) 33 (215) 24 89 0 (102) (0.10) (191) (0.20) 0.00
2019E 762 0 563 (203) 1,122 (458) 0 (458) (50) 0 (251) 0 (301) 363 664 0.69
2018E 15.1% 35.1% 64.3% 45.4% 35.8% 21.8% 15.9% 15.9% 20.0%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
2019E 6.3% 12.0% 21.4% 47.0% 37.7% 24.3% 18.2% 18.2% 20.0%
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI, POMPUI, TTL, NMG, SAWAD, TFD, PF. KT ZMICO is a co‐underwriter of the IPO of BGRIM.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant catalysts SELL: Expecting negative total returns of 10% or more primary market index by 10% over the next 12 months. over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
Buy (17E TP Bt14.10)
Company Update
Close Bt13.00
Media & Publishing July 06, 2017
Earnings upgrade/Earnings downgrade/Overview unchanged Upward revision from H&B Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
0.182
0.337
119.8%
92.9%
KT ZMICO vs. consensus Share data Reuters / Bloomberg
RS.BK/RS TB
Paid‐up Shares (m)
1,009.94
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
13.00/386.00
Foreign limit / actual (%)
49.00/3.13
52 week High / Low (Bt)
14.40/5.95
Avg. daily T/O (shares 000) NVDR (%)
4,036.00 4.27
Estimated free float (%)
41.33
Beta
1.32
URL
www.rs.co.th
CGR
Anti‐corruption
n.a.
Anapat Wanuschaiyapruk Analyst, no 57076 [email protected] 66 (0) 2-624‐6289
Maintain Buy with new TP at Bt14.10 CH8’s rating soared 11% in June led by Sida‐Ram and this should be reflected in the 3Q17 financial performance. H&B business has continued improving and has now become an essential part of RS. We revise up our net profit forecast on a higher H&B sales forecast. Maintain Buy with a new 17E TP at Bt14.10. Better rating will yield better financial results in Q3 The rating of CH8 leapt 11% from 0.572 to 0.638 because of the success of Sida‐Ram that airs during primetime on Monday to Thursday with further support from flagship programs like news, boxing, and primetime drama series. However, the improved rating will not deliver better financial results in Q2 as it will take another 2 – 3 months, meaning that CH8’s revenue in 3Q17 should be a new high. We forecast CH8’s revenue in 2Q17 at Bt350mn, +24%YoY and +14%QoQ based on the same ad rate as in 1Q17 at Bt30,000/min and a higher utilization rate at 57% (1Q17 at 50%). We expect revenue in 3Q17 to rise further to around Bt400mn. Upward revision for H&B sales H&B sales in 1Q17 came out at Bt199mn while monthly sales in 2Q17 were around Bt100mn. Momentum remains in an upward trend as the latest monthly sales keep breaking records. We hence revise up our H&B sales forecast by 43% for 17E (from Bt703mn to Bt1,003mn) and keep the sales growth rate at 20% for 18E. Our new 17E sales forecast looks achievable as it implies monthly sales of Bt100mn with the assumption of none in October. We keep the gross margin assumption at 70% but there is upside of around 5% since the management believes that the margin can expand from economies of scale. Solid turnaround in 2Q17E We forecast core profit for 2Q17E at Bt83mn, a solid turnaround from a loss of Bt85mn last year and growth of 654%QoQ. We expect media revenue to be flat YoY due to lower revenue of radio and satellite TV and higher revenue from CH8. The gross margin should improve from 17% to 20% on the cost savings effort. For H&B, we expect sales of around Bt300mn with the gross margin at 70% as in 1Q17. Buy rating maintained RS’s share price peaked at Bt14.40 and plunged by 10% as investors started to take profit. However, we think this provides a Buy opportunity at a less demanding share price, which now implies 17E PER and PEG at 33x and 0.5x, respectively. We maintain our Buy recommendation with a higher 17E TP at Bt14.10 (from Bt11.00). Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) EPS growth (%) Dividend (Bt) BV (Bt)
2014 4,306 385 0.43 ‐15.2% 0.30 1.70
2015 3,729 120 0.12 ‐72.1% 0.10 1.78
2016 3,125 (191) (0.20) ‐264.4% 0.00 1.09
2017E 3,431 337 0.40 302.6% 0.00 1.48
2018E 3,950 628 0.65 64.3% 0.26 2.13
2019E 4,198 762 0.79 21.4% 0.32 2.66
FY Ended 31 Dec PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 34.48 8.15 7.66 2.3% 21.7% ‐21%
2015 107.62 19.40 7.32 0.8% 7.2% ‐43%
2016 ‐124.64 44.33 11.98 0.0% ‐7.4% 102%
2017E 32.88 12.87 8.78 0.0% 30.8% 65%
2018E 20.01 9.53 6.10 2.0% 36.0% 23%
2019E 16.48 8.51 4.89 2.4% 32.9% 2%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
Figure 1: CH8’s rating
Figure 2: CH8’s ad rate and utilization rate
1.4
(Bt/min)
Source: RS, KT Zmico Research
Figure 3: TV revenue
Figure 4: Radio revenue
2Q17E
1Q17
4Q16
3Q16
2Q16
1Q16
4Q15
Sat/cab channels
Source: RS, KT Zmico Research
Figure 5: H&B revenue and gross margin
Figure 6: Media revenue breakdown
300
76%
77% 300
74%
73%
250
69%
150 100
70 29
0.78
3,000
0.76
2,500
0.74
199 70% 70%
200
0.72 0.7
91
84 53
40
53
0.68
50
0.66
0
0.64
2,000 1,500 1,000 500
H&B
10% 0%
2Q17E
1Q17
4Q16
3Q16
2,354 1,908 440
2,089
2,052 1,809 455
401
659
359
766
938
1,049
2014
2015
2016
702
Gross margin
Ch8
Satellite TV
Source: RS, KT Zmico Research
Source: RS, KT Zmico Research
Figure 7: Media and TV gross margin
Figure 8: H&B revenue
40%
20%
47% 37%
319 324
1,445
326 294
2,540 332 300
1,734
1,908
2018E
2019E
0
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17E
50%
30%
(Bt'mn) 77%
350
50
2Q16
1Q16
Source: RS, KT Zmico Research
(Bt'mn)
40%
2017E Radio
(Bt'mn) 1,600
36% 30%
26%
30%
9%
35% 30%
18%
17%
20%
32% 26%
1,400
1,256
1,200
1,319
1,345
2019E
2020E
1,003
1,000
12%
800
10%
600
0%
400
‐6%
232
228
2015
2016
200 ‐10% 2013
2014
2015
2016
Media (TV+radio)
Source: RS, KT Zmico Research
2017E
2018E
2019E
0 2017E
2018E
TV
Source: RS, KT Zmico Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
2Q17E
CH8
3Q15
2Q15
1Q15
4Q14
3Q14
2Q14
1Q14
0
50%
1Q17
49 50 49
4Q16
95 103 89
3Q16
96 89 58 54 53 40
2Q16
50
176 112
60%
Utilization rate
1Q16
100
130
113
2Q15
150
226
1Q15
200
232 200 190 162
4Q14
175
3Q14
250
306
282 287
276
57%
(Bt'mn) 200 173 180 160 160 141 140 129 140 119 117 111 108 120 103 101 100 82 80 75 80 60 40 20 0
2Q14
350
1Q14
(Bt'mn) 400 300
4Q15
Ad rate
Source: AGB Nielsen, KT Zmico Research
350
3Q15
Jun17
Apr17
RS
4Q15
One
Feb17
Oct16
Dec16
Jun16
Aug16
Apr16
MONO
3Q15
WORK
Feb16
Dec15
Oct15
Aug15
Jun15
Apr15
Feb15
Dec14
0.0
2Q15
0.2
1Q15
0.4
4Q14
0.6
3Q14
0.8
2Q14
1.0
55% 40,000 52% 52% 50% 50% 50% 46% 35,000 45% 42% 41% 30,000 37% 32% 25% 25,000 20,000 15,000 10,000 5,000 0
1Q14
1.2
Figure 9: RS’s 2Q17E earnings preview Profit and Loss (Btmn) Year‐end 31 Dec Revenue Gross profit EBITDA Interest expense Other income Income tax Other extraordinary Items Net profit (loss) Normalized profit (loss) Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%)
2Q16 747 178 21 (18) 8 20 0 (85) (85) (0.09) 23.9 2.9 (11.4)
1Q17 752 243 168 (24) 14 (14) 45 47 11 0.05 32.3 22.4 1.5
2Q17E 864 337 267 (23) 10 (21) 0 83 83 0.09 39.0 30.9 9.6
% YoY 15.6 88.8 1,149.8 26.8 22.1 (203.4) n.m. 197.7 197.7 198.7
% QoQ 14.9 38.9 58.4 (3.3) (26.7) 46.1 n.m. 76.7 654.4 76.8
6M17E 1,616 579 435 (47) 24 (35) 45 130 94 0.13 35.9 26.9 5.8
% YoY (17.7) (3.1) 63.0 31.4 122.9 181.4 n.m. 493.2 329.0 596.9
2017E 3,431 1,400 1,046 (114) 30 (84) 45 382 337 0.40 40.8 30.5 9.8
% YoY 9.8 76.3 244.3 37.2 (8.2) (447.7) (49.4) 474.1 276.4 479.0
Sources: RS, KT Zmico Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
% 17E 47.1 41.4 41.6 40.9 78.8 41.5 100.0 34.0 27.9 34.0
FINANCIAL TABLE PROFIT & LOSS (Btmn) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Other income / exp. EBT Corporate tax Extra Items Non‐controlling Net profit Reported EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btmn) Cash and equivalents Accounts receivable Inventories Investment PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Paid‐up shares Shareholder equity Total liab. & shareholder equity CASH FLOW (Btmn) Net income Non‐cash adjustment Depreciation & amortization Change in working capital Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Others Cash flow from financing Net change in cash Free cash flow FCF per share (Bt) PROFITABILITY Revenue growth (%) EBITDA growth (%) EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%)
2014 4,306 (2,941) 1,365 (792) 1,652 (1,078) 574 (78) 23 519 (107) (44) (27) 341 0.38 385 0.43 0.30
2015 3,729 (2,707) 1,022 (875) 694 (547) 147 (81) 51 118 12 2 (10) 122 0.12 120 0.12 0.10
2014 382 1,101 107 5 2,698 289 4,582 8 5 2,838 1,026 1,743 4,582
2015 757 876 163 5 2,510 533 4,844 6 7 3,117 1,014 1,727 4,844
2014 368 0 1,078 (93) 1,354 (1,033) 0 (1,032) (293) 100 (311) (8) (512) (191) 321 0.33
2019E 1,123 870 124 4 2,384 591 5,096 962 225 2,516 1,010 2,581 5,096
2018E 628 0 551 (263) 916 (449) 0 (449) 6 0 0 0 6 473 467 0.48
2017E 9.8% 244.3% ‐302.6% 40.8% 30.5% 14.7% 11.1% 9.8% 20.0%
2019E 4,198 (2,225) 1,973 (954) 1,582 (563) 1,019 (96) 30 953 (191) 0 0 762 0.79 762 0.79 0.32
2018E 760 818 120 4 2,489 578 4,770 912 325 2,701 1,010 2,069 4,770
2017E 382 0 540 (342) 580 (440) 0 (440) 44 0 0 0 44 184 140 0.14
2016 ‐16.2% ‐56.2% ‐264.4% 25.4% 9.7% ‐5.3% ‐3.3% ‐6.1% 11.2%
2018E 3,950 (2,157) 1,793 (932) 1,412 (551) 861 (106) 30 785 (157) 0 0 628 0.65 628 0.65 0.26
2017E 288 711 113 4 2,591 552 4,259 762 469 2,817 1,010 1,442 4,259
2016 (102) 43 468 (1,029) (620) (611) 11 (599) 1,131 0 (100) (465) 565 (653) (1,219) (1.26)
2015 ‐13.4% ‐58.0% ‐72.1% 27.4% 18.6% 4.0% 3.3% 3.2% ‐10.5%
2017E 3,431 (2,032) 1,400 (894) 1,046 (540) 506 (114) 30 421 (84) 45 0 382 0.40 337 0.40 0.00
2016 104 648 130 4 2,691 563 4,139 718 469 3,080 1,010 1,060 4,139
2015 132 42 547 470 1,191 (666) 9 (657) (10) 0 (181) 33 (158) 376 534 0.53
2014 24.4% 102.3% ‐15.2% 31.7% 38.4% 13.3% 7.9% 8.9% 20.7%
2016 3,125 (2,331) 794 (959) 304 (468) (165) (83) 33 (215) 24 89 0 (102) (0.10) (191) (0.20) 0.00
2019E 762 0 563 (203) 1,122 (458) 0 (458) (50) 0 (251) 0 (301) 363 664 0.69
2018E 15.1% 35.1% 64.3% 45.4% 35.8% 21.8% 15.9% 15.9% 20.0%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
2019E 6.3% 12.0% 21.4% 47.0% 37.7% 24.3% 18.2% 18.2% 20.0%
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI, POMPUI, TTL, NMG, SAWAD, TFD, PF. KT ZMICO is a co‐underwriter of the IPO of BGRIM.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant catalysts SELL: Expecting negative total returns of 10% or more primary market index by 10% over the next 12 months. over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
