Media (Digital TV)
Media (Digital TV) Industry Update
Neutral
February 8, 2016
Ratings back on track
Source: Aspen Share data (Media & Publishing) SET index
1,306.29
Sector index
60.73
52‐week high
88.88
52‐week low
57.90
Market capitalization (Bt m)
225,815.66
% of market cap
1.81
Avg daily turnover (m shares)
203.82
Beta
1.41
Sector Performance (%)
1M
3M
Absolute
‐2.17
‐5.49
‐29.88
Relative
‐5.63
1.47
‐14.39
Anapat Wanuschaiyapruk Analyst, no 57076 [email protected] 66 (0) 2-624‐6289
12M
Higher ratings seen across the board The TV ratings of leading channels plunged in Nov and Dec last year after the channel number reshuffling ordered by the NBTC took effect. However, audiences returned in January along with TV ratings. Ch7’s rating increased 8.2% while Ch3’s increased 5.7%. The rankings of the top eight channels have not changed much with Workpoint1 remaining at number three, followed by Ch8 (RS) at number four and MONO29 at number five. The most remarkable in January was 3SD, which made its all‐time high TV rating at 0.277, increasing 26% from the previous month. Thus far, BEC has made very good progress as its three channels are staying firmly in the top ten. Industry participants are brainstorming for a way out A working group consisting of TV operators, broadcasting network operators, banks, the Ministry of Finance, the Office of the Council of State, and the Office of the Attorney General has been set up to address the high operator attrition rate . The group now proposes ten remedies as shown in Figure 6. We believe that it will not be easy for TV operators to exit the business without a severe financial impact. We are concerned that if spectrum licensees are allowed to stop paying the remaining license fee, it might set a standard for other spectrum licenses such as in the mobile business. However, if TV operators are ultimately allowed to leave, around Bt2,000mn of ad spending from these channels will be spread among those who remain, which would be moderately positive to second‐tier channels like Workpoint1, One, Ch8, MONO29, MCOT, etc. New gen more familiar with TV channels of WORK and GRAMMY The University of the Thai Chamber of Commerce conducted a survey of 800 teenagers between 18 – 22 years of age in the Bangkok metropolitan area last December (Figure 7). The results showed that WORK and GRAMMY are now more familiar to the new generation of audiences than other new channels. Ch3 is still their favorite as 24% of the group picked the channel. Numbers two to four were Ch7, Workpoint1, and One (GRAMMY), with 14.5%, 14%, and 11% of the group picking the channels, respectively. This is the light at the end of the tunnel for GRAMMY. The popularity of One and GMM25 among teenagers in the Bangkok metropolitan area means that both channels have the potential to draw ad spending since their content has a very strong niche market characteristic. Our only concern is their high content cost strategy, which will continue to be a drag on the financial performance in 16E. Top pick: WORK We like Workpoint1’s new programs in 2016 and some of them have already shown good potential. I Can See Your Voice (Thailand) and Let Me In (Thailand) have been on‐air since the beginning of this year and the feedback is impressive. There are other new programs lining up and we believe they will be catalysts for Workpoint1’s TV ratings this year. The channel targets to attain a rating of 1.125 (24‐hour scale) this year. WORK is still our top pick in the sector with the 16E TP of Bt58.50. The recent stock sell‐off provides upside of 47% while our view remains unchanged. WORK is now trading at 16E PER of 29.7x.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
Figure 1: Dec and Jan TV ratings (4+, 24 hours, Nationwide)
Channel
Dec
Jan
%
Channel
Dec
Jan
%
Channel
Dec
Jan
%
2.305 2.495
8%
0.120
0.130
8%
0.057 0.058
2%
1.876 1.983
6%
0.134
0.110 ‐18%
0.051 0.046
‐10%
0.590 0.664
13%
0.122
0.097 ‐20%
0.050 0.044
‐12%
0.449 0.486
8%
0.081
0.082
1%
0.046 0.039
‐15%
0.373 0.411
10%
0.072
0.080
11%
0.029 0.032
10%
0.246 0.284
15%
0.076
0.077
1%
0.025 0.026
4%
0.220 0.277
26%
0.061
0.076
25%
0.022 0.019
‐14%
0.183 0.193
5%
0.071
0.064 ‐10%
0.132 0.133
1%
0.060
0.059
‐2%
Source: AGB Nielsen, KT Zmico Research Figure 2: Ratings of Ch7 and Ch3
Figure 3: Ratings of new digital channels 1.0
4 3.5
0.8
3 2.5
0.6
2 1.5
0.4
1
0.2
0.5
3SD
CH3 (LHS)
3FAMILY (RHS)
Source: AGB Nielsen, KT Zmico Research
3SD (RHS)
MCOT
CH5
07/15
05/15
03/15
01/15
0 03/14
0.00 01/16
0.1
0.00 11/15
0.2
0.05 09/15
0.10
0.50 07/15
1.00
05/15
0.3
03/15
0.15
01/15
0.4
1.50
11/14
0.5
0.20
09/14
0.25
2.00
07/14
2.50
05/14
0.6
03/14
0.30
11/14
Figure 5: Ratings of Ch5, Ch9, Thai PBS
09/14
Figure 4: Ratings of BEC’s channels
07/14
Source: AGB Nielsen, KT Zmico Research
05/14
Source: AGB Nielsen, KT Zmico Research
3.00
TPBS
Source: AGB Nielsen, KT Zmico Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
12/15
10/15
08/15
OneHD
Thairath
01/16
MONO
06/15
04/15
02/15
12/14
10/14
08/14 RS
11/15
WORK
09/15
CH3
06/14
01/16
11/15
09/15
07/15
05/15
03/15
01/15
11/14
09/14
07/14
05/14
03/14
CH7
04/14
0.0
0
Figure 6: Ten remedies for TV digital industry as proposed by the working group
Postpone the 3rd payment of license fee
Extend license life or restart the license life
Temporarily halt the license or permanently cease operations
Subsidize TV operators
Arrange the same channel numbers in all platforms
Distribute digital TV coupons to all 22 million households
Promote digital TV
Implement a TV rating system
Charge levy for R&D funds of less than two percent
Subsidize expenses of MUX network operators
Source: Bangkokbiznews, KT Zmico Research
Figure 7: UTCC’s poll on the favorite channels of teenagers in the Bangkok metropolitan area
Other 12.9%
Ch3 24.0%
3Family 1.5% TPBS 2.5%
Ch8 3.5%
3SD 3.8% MONO29 4.8%
Ch7 14.5%
GMM25 7.5%
One 11.0%
Workpoint1 14.0%
Source: UTCC, KT Zmico Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
Note: KT ZMICO is a partnership between KTB and ZMICO. 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, SUTHA, ZMICO, MAKRO, CPALL, SAFARI, PACE, PLE, TPOLY. KT ZMICO is a co‐underwriter of TKN.
Anti‐corruption Progress Indicator
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 BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 4
Neutral
February 8, 2016
Ratings back on track
Source: Aspen Share data (Media & Publishing) SET index
1,306.29
Sector index
60.73
52‐week high
88.88
52‐week low
57.90
Market capitalization (Bt m)
225,815.66
% of market cap
1.81
Avg daily turnover (m shares)
203.82
Beta
1.41
Sector Performance (%)
1M
3M
Absolute
‐2.17
‐5.49
‐29.88
Relative
‐5.63
1.47
‐14.39
Anapat Wanuschaiyapruk Analyst, no 57076 [email protected] 66 (0) 2-624‐6289
12M
Higher ratings seen across the board The TV ratings of leading channels plunged in Nov and Dec last year after the channel number reshuffling ordered by the NBTC took effect. However, audiences returned in January along with TV ratings. Ch7’s rating increased 8.2% while Ch3’s increased 5.7%. The rankings of the top eight channels have not changed much with Workpoint1 remaining at number three, followed by Ch8 (RS) at number four and MONO29 at number five. The most remarkable in January was 3SD, which made its all‐time high TV rating at 0.277, increasing 26% from the previous month. Thus far, BEC has made very good progress as its three channels are staying firmly in the top ten. Industry participants are brainstorming for a way out A working group consisting of TV operators, broadcasting network operators, banks, the Ministry of Finance, the Office of the Council of State, and the Office of the Attorney General has been set up to address the high operator attrition rate . The group now proposes ten remedies as shown in Figure 6. We believe that it will not be easy for TV operators to exit the business without a severe financial impact. We are concerned that if spectrum licensees are allowed to stop paying the remaining license fee, it might set a standard for other spectrum licenses such as in the mobile business. However, if TV operators are ultimately allowed to leave, around Bt2,000mn of ad spending from these channels will be spread among those who remain, which would be moderately positive to second‐tier channels like Workpoint1, One, Ch8, MONO29, MCOT, etc. New gen more familiar with TV channels of WORK and GRAMMY The University of the Thai Chamber of Commerce conducted a survey of 800 teenagers between 18 – 22 years of age in the Bangkok metropolitan area last December (Figure 7). The results showed that WORK and GRAMMY are now more familiar to the new generation of audiences than other new channels. Ch3 is still their favorite as 24% of the group picked the channel. Numbers two to four were Ch7, Workpoint1, and One (GRAMMY), with 14.5%, 14%, and 11% of the group picking the channels, respectively. This is the light at the end of the tunnel for GRAMMY. The popularity of One and GMM25 among teenagers in the Bangkok metropolitan area means that both channels have the potential to draw ad spending since their content has a very strong niche market characteristic. Our only concern is their high content cost strategy, which will continue to be a drag on the financial performance in 16E. Top pick: WORK We like Workpoint1’s new programs in 2016 and some of them have already shown good potential. I Can See Your Voice (Thailand) and Let Me In (Thailand) have been on‐air since the beginning of this year and the feedback is impressive. There are other new programs lining up and we believe they will be catalysts for Workpoint1’s TV ratings this year. The channel targets to attain a rating of 1.125 (24‐hour scale) this year. WORK is still our top pick in the sector with the 16E TP of Bt58.50. The recent stock sell‐off provides upside of 47% while our view remains unchanged. WORK is now trading at 16E PER of 29.7x.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
Figure 1: Dec and Jan TV ratings (4+, 24 hours, Nationwide)
Channel
Dec
Jan
%
Channel
Dec
Jan
%
Channel
Dec
Jan
%
2.305 2.495
8%
0.120
0.130
8%
0.057 0.058
2%
1.876 1.983
6%
0.134
0.110 ‐18%
0.051 0.046
‐10%
0.590 0.664
13%
0.122
0.097 ‐20%
0.050 0.044
‐12%
0.449 0.486
8%
0.081
0.082
1%
0.046 0.039
‐15%
0.373 0.411
10%
0.072
0.080
11%
0.029 0.032
10%
0.246 0.284
15%
0.076
0.077
1%
0.025 0.026
4%
0.220 0.277
26%
0.061
0.076
25%
0.022 0.019
‐14%
0.183 0.193
5%
0.071
0.064 ‐10%
0.132 0.133
1%
0.060
0.059
‐2%
Source: AGB Nielsen, KT Zmico Research Figure 2: Ratings of Ch7 and Ch3
Figure 3: Ratings of new digital channels 1.0
4 3.5
0.8
3 2.5
0.6
2 1.5
0.4
1
0.2
0.5
3SD
CH3 (LHS)
3FAMILY (RHS)
Source: AGB Nielsen, KT Zmico Research
3SD (RHS)
MCOT
CH5
07/15
05/15
03/15
01/15
0 03/14
0.00 01/16
0.1
0.00 11/15
0.2
0.05 09/15
0.10
0.50 07/15
1.00
05/15
0.3
03/15
0.15
01/15
0.4
1.50
11/14
0.5
0.20
09/14
0.25
2.00
07/14
2.50
05/14
0.6
03/14
0.30
11/14
Figure 5: Ratings of Ch5, Ch9, Thai PBS
09/14
Figure 4: Ratings of BEC’s channels
07/14
Source: AGB Nielsen, KT Zmico Research
05/14
Source: AGB Nielsen, KT Zmico Research
3.00
TPBS
Source: AGB Nielsen, KT Zmico Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
12/15
10/15
08/15
OneHD
Thairath
01/16
MONO
06/15
04/15
02/15
12/14
10/14
08/14 RS
11/15
WORK
09/15
CH3
06/14
01/16
11/15
09/15
07/15
05/15
03/15
01/15
11/14
09/14
07/14
05/14
03/14
CH7
04/14
0.0
0
Figure 6: Ten remedies for TV digital industry as proposed by the working group
Postpone the 3rd payment of license fee
Extend license life or restart the license life
Temporarily halt the license or permanently cease operations
Subsidize TV operators
Arrange the same channel numbers in all platforms
Distribute digital TV coupons to all 22 million households
Promote digital TV
Implement a TV rating system
Charge levy for R&D funds of less than two percent
Subsidize expenses of MUX network operators
Source: Bangkokbiznews, KT Zmico Research
Figure 7: UTCC’s poll on the favorite channels of teenagers in the Bangkok metropolitan area
Other 12.9%
Ch3 24.0%
3Family 1.5% TPBS 2.5%
Ch8 3.5%
3SD 3.8% MONO29 4.8%
Ch7 14.5%
GMM25 7.5%
One 11.0%
Workpoint1 14.0%
Source: UTCC, KT Zmico Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
Note: KT ZMICO is a partnership between KTB and ZMICO. 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, SUTHA, ZMICO, MAKRO, CPALL, SAFARI, PACE, PLE, TPOLY. KT ZMICO is a co‐underwriter of TKN.
Anti‐corruption Progress Indicator
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 BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 4
