Mono Technology AWS
Mono Technology Outperform (17E TP Bt3.78)
Company Update
Close Bt3.50
Media & Publishing March 20, 2017
Earnings upgrade/Earnings downgrade/Overview unchanged
Up and rising Price Performance (%)
More exciting TV programs on the way MONO29 has stood firm at number four in the free TV industry. Its rating rose 85% last year and it holds an 8.6% audience share. We see that its TV programs will become much more exciting in 17E and 18E, with blockbuster movies lining up. The output deal with major Hollywood studios (Paramount, Universal, Disney, Warner Brothers, and Fox) ensures that good TV programs will not be scarce from MONO29 and this will gradually bear fruit. The outlook for MONO29 is still sound. Sustaining mobile content business is our best case Revenue from mobile business dropped further by 9.5% last year and it still has not changed much so far. MONO continues to focus on Horoscope and entertainment clips, which are its leading category. Monomaxxx (MONO’s SVOD business) looks like the only unit that has potential for growth but its content consists mainly of Asian movies and series, making it less attractive for subscribers. Therefore, sustaining the revenue is still our best‐case scenario.
S ource: SET Smart
FY17
FY18
Consensus EPS Bt)
0.072
0.116
KT ZMICO vs. consensus Share data
‐2.8%
20.7%
Reuters / Bloomberg
MONO.BK/MONO TB
Paid‐up Shares (m)
3,343.94
Par (Bt)
0.10
Market cap (Bt bn / US$ m)
12.00/336.00
Foreign limit / actual (%)
49.00/1.20
52 week High / Low (Bt)
4.10/2.02
Avg. daily T/O (shares 000)
18,251.00
NVDR (%)
1.41
Estimated free float (%)
23.59
Beta
1.67
URL
www.mono.co.th
CGR
Strong financial turnaround We expect the ad rate to increase by 54% to Bt26,000/min while the utilization rate should be maintained at around 95%. We forecast TV revenue to increase by 63% to Bt1,623mn while mobile content will drop further to Bt840mn. Like other TV players, the period of high growth of costs has passed, so we expect its gross margin to continue to improve to 38.5% and 46.1% in 17E and 18E. Net profit will turn from a loss of Bt250mn in 16 to Bt310mn and Bt648mn in 17E and 18E. 1Q17 should also show a turnaround from a loss of Bt80mn in 1Q16. General mandate for PP to be submitted for shareholders’ approval MONO will ask shareholders to approve a general mandate for private placement of about 10% of existing shares. The management said that the general mandate for PP will give the firm financial flexibility and MONO intends to use it when it sees potential investment opportunities. Therefore, among TV players, MONO has apparent risk on a capital call. Outperform maintained at new TP of Bt3.78 We revised up the net profit forecasts in 17E ‐ 19E by 25%, 31%, and 25%, respectively. The 17E TP increases to Bt3.78. Maintain Outperform. Financials and Valuation
Anti‐corruption
Level 4 (Certified)
Anapat Wanuschaiyapruk Analyst, no. 57076 [email protected] 66 (0) 2-624‐6289
FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) EP S growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2015 1,893 (487) (0.11) 3816.9% 0.00 0.78 2015 ‐32.94 62.94 4.48 0.0% ‐18.2% 28%
2016 2,077 (250) (0.05) ‐48.7% 0.00 0.74 2016 ‐64.23 16.93 4.74 0.0% ‐10.4% 61%
2017E 2,732 310 0.07 ‐224.0% 0.00 0.99 2017E 51.79 9.56 3.54 0.0% 10.7% 26%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 6
2018E 3,224 648 0.14 109.3% 0.00 1.18 2018E 24.75 7.41 2.97 0.0% 17.3% 14%
2019E 3,651 933 0.20 44.1% 0.00 1.45 2019E 17.18 6.21 2.42 0.0% 20.5% ‐1%
More exciting TV programs on the way MONO29 is still the fourth most watched channel in Thailand. Its rating rose 85% last year, holding an 8.6% audience share. Its average rating (age 4+, 24 hours, nationwide) and audience share just peaked at 0.720 and 8.7% in January. Movies and series are still the majority of MONO29’s schedule at 45% and 23%, respectively. Figure 1: MONO29’s TV rating Figure 2: MONO29’s program type breakdown 1.2
News 25%
1.0 0.8 0.6 0.4
Others 8%
0.2
WORK
One
Source: MONO, KT Zmico Research
RS
MONO
Feb17
Dec16
Oct16
Aug16
Jun16
Apr16
Feb16
Dec15
Oct15
Aug15
Jun15
Apr15
Feb15
Dec14
0.0
Series 23%
Source: MONO, KT Zmico Research
As audiences become more familiar with the channel, there is a certain benefit to its movie library. For example, The Man of Steel that was first run in 14 had a rating of around 2.20. When it was rerun in 16, the rating jumped to 3.71. This means that the same movie was able to generate 50% higher revenue than the previous run. New movies and series in 17 and 18, as shown below, make the future of the channel look very promising. We believe the output deal with major Hollywood studios (Paramount, Universal, Disney, Warner Brothers, and Fox) ensures that good TV programs will not be scarce from MONO29 and this will gradually bear fruit. MONO29 will be the first free‐to‐air channel that airs blockbuster movies from 16 onwards, which will make its TV programming more interesting. Thus, the outlook of MONO29 is still sound. Figure 3: Movie and series lineup
Sources: MONO REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 6
Movies 45%
Sustaining mobile business is our best case The mobile business continued to head down in 16. Total revenue was Bt882mn, ‐9.5%YoY. Revenue from SMS was Bt132mn, ‐38%YoY along with the declining use of SMS. Revenue from other mobile content also dropped 1%YoY. We do not see much change in the business outlook so far. MONO is still focusing on Horoscope and entertainment clips, which are its leading category. Monomaxxx (MONO’s SVOD business) looks like the only unit that has potential for growth. However, its content in Monomaxxx has a larger portion of Asian movies and series (45%) when compared to its rivals like Netflix, iflix, and Hollywood HDTV, making it less attractive in our view. The NBTC reported that revenue from subscriptions of Hollywood HDTV ranked first at Bt299mn, followed by Primetime at Bt143mn and Monomaxxx at Bt98mn. Thus, we view that the overall mobile content business will still face hard times and sustaining the revenue remains our best‐case scenario. Figure 4: Mobile business breakdown Figure 5: SVOD market share
337
400
215
132
200 0 2014
2015
2016
Mobile contents
SMS
143 98
73 18
17 HOOQ
600
299
iflix
750
Doo Nee
761
Monomaxxx
800
786
Primetime
1,000
(Bt'mn) 350 300 250 200 150 100 50 0
Hollywood HDTV
(Bt'mn)
Source: MONO, KT Zmico Research Source: NBTC, KT Zmico Research Strong financial turnaround Its ad rate is still cheap compared to the ratings, providing room for high growth. In 16, its average ad rate was only Bt16,900/min, which is approximately 50% cheaper than CH3’s at the same rating. The utilization rate was well maintained at around 100% (for 18 hours) during the first nine months of last year before it dropped to 56% in 4Q16 along with the industry. The management estimates that there was an impact to the top line of around Bt200mn for the quarter. Figure 6: Ad rate and utilization rate Figure 7: MONO29’s quarterly revenue (Bt/min) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0
117%
(Bt'mn)
116% 98%
86%
8,069 8,486 8,785
92%
98%
90%
12,618 13,806
16,639
20,391 56% 15,947
120%
350
100%
300
80%
250
60%
200
40%
150
20%
100
0% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Ad rate
Utilization rate
Source: MONO, KT Zmico Research
50 0
315
162 113
192
332
201 148
142
75 35 3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
Source: NBTC, KT Zmico Research
This year, the management expects the ad rate at Bt29,000/min, +71%YoY, with a 100% utilization rate, which implies total ad revenue of around Bt1,900mn. We view that such an ad rate hike looks too high and assume the ad rate at Bt26,000/min and a utilization rate around 95% for 17E, and an ad rate of Bt33,800/min and a utilization rate of 95% for 18E. Our revenue forecast is at Bt1,623mn in 17E and Bt2,100mn in 18E, +63%YoY and 30%YoY, respectively. For other business, we forecast revenue of the mobile business to decline further to Bt840mn REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 6
3Q16
4Q16
while there will be box office revenue from T Moment movies of around Bt60mn for three movies. Like other digital TV, the phase of high cost growth has passed. The gross margin will increase from 21.3% last year to 38.5% this year and 46.1% next year. MONO plans to spend around Bt1,000 on acquisition of content, including self‐made Thai drama series and movies under T Moment. Figure 8: Ad rate and utilization rate Figure 9: Gross profit margin (Bt'mn) 3,500
3,224
2,500 2,000 1,500
1,905 1,407
500
1,526
920
1,122
2013
996
624
0 2014 TV
840 840
2015
2016
MVAS
59% 46%
50%
38%
34%
40% 30%
882
975
1,000
2,077
64%
60%
2,732
3,000
70%
1,623
2,110
21%
20%
13%
10% 2017E
2018E
0% 2012
Other
Source: MONO, KT Zmico Research
2013
2014
2015
2016
2017E
2018E
Source: MONO, KT Zmico Research
We expect the bottom line to show a strong turnaround and there should be no quarterly loss going forward. We forecast net profit of Bt310mn this year, turning from a loss of Bt250mn last year, and Bt648mn next year, +109%YoY. Net profit in 1Q17 should turn to profit from a loss of Bt80mn in 1Q16. The company has actually turned a profit since 2Q16 with a one‐time loss occurring in 4Q16. General mandate for PP to be submitted for shareholders’ approval MONO will ask shareholders for approval of a general mandate for private placement. The total additional shares will be 334mn shares or about 10% control dilution. MONO did the same thing last year and the PP was just sold to private investors in January. The management said that the general mandate for PP will give the firm financial flexibility and MONO intends to use it when it sees potential investment opportunities. Therefore, among TV players, MONO has apparent risk on a capital call. Figure 10: Earnings revision Year‐end 31 Dec Revenue (Bt'mn) EBITDA (Bt'mn) Share of profit (Bt'mn) Net profit (Bt'mn) % growth Core profit (Bt'mn) % growth Core EPS (Bt) Core EPS growth (%) Gross margin (%) EBITDA margin (%)
Previous
2017 New
%chg
Previous
2018 New
%chg
Previous
2019 New
%chg
2,689 1,241 0 247 ‐199% 247 ‐221% 0.08 ‐199% 38.4% 46.2%
2,732 1,421 0 310 ‐224% 310 ‐252% 0.09 ‐215% 38.5% 52.0%
2% 14% n.a. 25% ‐25% 25% ‐31% 16% ‐16% 0% 6%
3,052 1,570 0 493 100% 493 100% 0.15 100% 44.9% 51.5%
3,224 1,834 0 648 109% 648 109% 0.19 109% 46.1% 56.9%
6% 17% n.a. 31% 9% 31% 9% 21% 9% 1% 5%
3,435 1,916 0 745 51% 745 51% 0.23 51% 50.2% 55.8%
3,651 2,187 0 933 44% 933 44% 0.27 44% 51.0% 59.9%
6% 14% n.a. 25% ‐7% 25% ‐7% 16% ‐7% 1% 4%
Sources: KT Zmico Research REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 6
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 Gain (loss) from affiliates Extra Items Non‐controlling Net profit Reported EPS Fully diluted 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 (%)
2013 1,407 (582) 826 (373) 512 (59) 452 (3) 91 540 (39) 0 0 0 501 0.16 0.11 501 0.16 0.43
2014 1,526 (1,011) 515 (588) 217 (290) (73) (81) 77 (77) 64 0 0 0 (12) (0.00) (0.00) (12) (0.00) 0.16
2015 1,893 (1,653) 240 (680) 200 (639) (439) (133) 32 (540) 54 0 0 0 (487) (0.16) (0.11) (487) (0.16) 0.00
2016 2,077 (1,634) 443 (525) 802 (885) (83) (145) 36 (192) (10) (2) (46) 0 (250) (0.08) (0.05) (203) (0.08) 0.00
2013 2,277 416 7 0 582 105 3,386 17 15 293 140 3,093 3,386
2014 998 578 8 0 3,569 248 5,400 13 409 2,489 308 2,911 5,400
2015 195 554 10 0 4,154 365 5,278 146 734 2,854 310 2,424 5,278
2016 87 530 9 51 4,315 400 5,392 196 1,342 3,026 320 2,366 5,392
2017E 2,732 (1,681) 1,051 (559) 1,421 (929) 492 (141) 36 387 (77) 0 0 0 310 0.09 0.07 310 0.09 0.00
2013 501 6 59 (131) 436 (357) 0 (357) (21) 2,720 (585) 0 2,115 2,194 79 0.02
2014 (12) 12 290 (118) 171 (1,659) 0 (1,659) 384 0 (174) 0 210 (1,279) (1,488) (0.32)
2013 ‐8.5% ‐25.4% ‐31.9% 58.7% 36.4% 32.1% 35.6% 35.6% 7.2%
2015 (524) 33 639 (259) (111) (1,139) 0 (1,138) 441 52 (0) (61) 432 (809) (1,249) (0.27)
2014 8.5% ‐57.6% ‐102.5% 33.8% 14.2% ‐4.8% ‐0.8% ‐0.8% 83.8%
2017E 363 697 9 51 4,386 408 5,914 241 1,003 2,483 498 3,430 5,914
2016 (250) 59 885 (430) 264 (1,042) (83) (1,125) 658 95 (0) 0 753 (107) (862) (0.19)
2015 24.0% ‐7.8% 3790.5% 12.7% 10.6% ‐23.2% ‐25.7% ‐25.7% 9.9%
2018E 586 822 9 51 4,433 414 6,315 241 903 2,237 498 4,078 6,315
2017E 310 0 929 (424) 815 (1,001) 0 (1,001) (294) 755 0 0 461 276 (186) (0.04)
2016 9.7% 271.8% ‐50.3% 21.3% 38.6% ‐4.0% ‐12.0% ‐9.8% ‐5.0%
2018E 3,224 (1,737) 1,487 (597) 1,834 (943) 891 (118) 37 810 (162) 0 0 0 648 0.19 0.14 648 0.19 0.00
2018E 648 0 943 (278) 1,313 (990) 0 (990) (100) 0 0 0 (100) 223 323 0.07
2017E 31.5% 77.1% ‐214.5% 38.5% 52.0% 18.0% 11.3% 11.3% 20.0%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 6
2018E 18.0% 29.1% 109.3% 46.1% 56.9% 27.6% 20.1% 20.1% 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, TFD, THANI.
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 UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 6 of 6
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
Company Update
Close Bt3.50
Media & Publishing March 20, 2017
Earnings upgrade/Earnings downgrade/Overview unchanged
Up and rising Price Performance (%)
More exciting TV programs on the way MONO29 has stood firm at number four in the free TV industry. Its rating rose 85% last year and it holds an 8.6% audience share. We see that its TV programs will become much more exciting in 17E and 18E, with blockbuster movies lining up. The output deal with major Hollywood studios (Paramount, Universal, Disney, Warner Brothers, and Fox) ensures that good TV programs will not be scarce from MONO29 and this will gradually bear fruit. The outlook for MONO29 is still sound. Sustaining mobile content business is our best case Revenue from mobile business dropped further by 9.5% last year and it still has not changed much so far. MONO continues to focus on Horoscope and entertainment clips, which are its leading category. Monomaxxx (MONO’s SVOD business) looks like the only unit that has potential for growth but its content consists mainly of Asian movies and series, making it less attractive for subscribers. Therefore, sustaining the revenue is still our best‐case scenario.
S ource: SET Smart
FY17
FY18
Consensus EPS Bt)
0.072
0.116
KT ZMICO vs. consensus Share data
‐2.8%
20.7%
Reuters / Bloomberg
MONO.BK/MONO TB
Paid‐up Shares (m)
3,343.94
Par (Bt)
0.10
Market cap (Bt bn / US$ m)
12.00/336.00
Foreign limit / actual (%)
49.00/1.20
52 week High / Low (Bt)
4.10/2.02
Avg. daily T/O (shares 000)
18,251.00
NVDR (%)
1.41
Estimated free float (%)
23.59
Beta
1.67
URL
www.mono.co.th
CGR
Strong financial turnaround We expect the ad rate to increase by 54% to Bt26,000/min while the utilization rate should be maintained at around 95%. We forecast TV revenue to increase by 63% to Bt1,623mn while mobile content will drop further to Bt840mn. Like other TV players, the period of high growth of costs has passed, so we expect its gross margin to continue to improve to 38.5% and 46.1% in 17E and 18E. Net profit will turn from a loss of Bt250mn in 16 to Bt310mn and Bt648mn in 17E and 18E. 1Q17 should also show a turnaround from a loss of Bt80mn in 1Q16. General mandate for PP to be submitted for shareholders’ approval MONO will ask shareholders to approve a general mandate for private placement of about 10% of existing shares. The management said that the general mandate for PP will give the firm financial flexibility and MONO intends to use it when it sees potential investment opportunities. Therefore, among TV players, MONO has apparent risk on a capital call. Outperform maintained at new TP of Bt3.78 We revised up the net profit forecasts in 17E ‐ 19E by 25%, 31%, and 25%, respectively. The 17E TP increases to Bt3.78. Maintain Outperform. Financials and Valuation
Anti‐corruption
Level 4 (Certified)
Anapat Wanuschaiyapruk Analyst, no. 57076 [email protected] 66 (0) 2-624‐6289
FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) EP S growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2015 1,893 (487) (0.11) 3816.9% 0.00 0.78 2015 ‐32.94 62.94 4.48 0.0% ‐18.2% 28%
2016 2,077 (250) (0.05) ‐48.7% 0.00 0.74 2016 ‐64.23 16.93 4.74 0.0% ‐10.4% 61%
2017E 2,732 310 0.07 ‐224.0% 0.00 0.99 2017E 51.79 9.56 3.54 0.0% 10.7% 26%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 6
2018E 3,224 648 0.14 109.3% 0.00 1.18 2018E 24.75 7.41 2.97 0.0% 17.3% 14%
2019E 3,651 933 0.20 44.1% 0.00 1.45 2019E 17.18 6.21 2.42 0.0% 20.5% ‐1%
More exciting TV programs on the way MONO29 is still the fourth most watched channel in Thailand. Its rating rose 85% last year, holding an 8.6% audience share. Its average rating (age 4+, 24 hours, nationwide) and audience share just peaked at 0.720 and 8.7% in January. Movies and series are still the majority of MONO29’s schedule at 45% and 23%, respectively. Figure 1: MONO29’s TV rating Figure 2: MONO29’s program type breakdown 1.2
News 25%
1.0 0.8 0.6 0.4
Others 8%
0.2
WORK
One
Source: MONO, KT Zmico Research
RS
MONO
Feb17
Dec16
Oct16
Aug16
Jun16
Apr16
Feb16
Dec15
Oct15
Aug15
Jun15
Apr15
Feb15
Dec14
0.0
Series 23%
Source: MONO, KT Zmico Research
As audiences become more familiar with the channel, there is a certain benefit to its movie library. For example, The Man of Steel that was first run in 14 had a rating of around 2.20. When it was rerun in 16, the rating jumped to 3.71. This means that the same movie was able to generate 50% higher revenue than the previous run. New movies and series in 17 and 18, as shown below, make the future of the channel look very promising. We believe the output deal with major Hollywood studios (Paramount, Universal, Disney, Warner Brothers, and Fox) ensures that good TV programs will not be scarce from MONO29 and this will gradually bear fruit. MONO29 will be the first free‐to‐air channel that airs blockbuster movies from 16 onwards, which will make its TV programming more interesting. Thus, the outlook of MONO29 is still sound. Figure 3: Movie and series lineup
Sources: MONO REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 6
Movies 45%
Sustaining mobile business is our best case The mobile business continued to head down in 16. Total revenue was Bt882mn, ‐9.5%YoY. Revenue from SMS was Bt132mn, ‐38%YoY along with the declining use of SMS. Revenue from other mobile content also dropped 1%YoY. We do not see much change in the business outlook so far. MONO is still focusing on Horoscope and entertainment clips, which are its leading category. Monomaxxx (MONO’s SVOD business) looks like the only unit that has potential for growth. However, its content in Monomaxxx has a larger portion of Asian movies and series (45%) when compared to its rivals like Netflix, iflix, and Hollywood HDTV, making it less attractive in our view. The NBTC reported that revenue from subscriptions of Hollywood HDTV ranked first at Bt299mn, followed by Primetime at Bt143mn and Monomaxxx at Bt98mn. Thus, we view that the overall mobile content business will still face hard times and sustaining the revenue remains our best‐case scenario. Figure 4: Mobile business breakdown Figure 5: SVOD market share
337
400
215
132
200 0 2014
2015
2016
Mobile contents
SMS
143 98
73 18
17 HOOQ
600
299
iflix
750
Doo Nee
761
Monomaxxx
800
786
Primetime
1,000
(Bt'mn) 350 300 250 200 150 100 50 0
Hollywood HDTV
(Bt'mn)
Source: MONO, KT Zmico Research Source: NBTC, KT Zmico Research Strong financial turnaround Its ad rate is still cheap compared to the ratings, providing room for high growth. In 16, its average ad rate was only Bt16,900/min, which is approximately 50% cheaper than CH3’s at the same rating. The utilization rate was well maintained at around 100% (for 18 hours) during the first nine months of last year before it dropped to 56% in 4Q16 along with the industry. The management estimates that there was an impact to the top line of around Bt200mn for the quarter. Figure 6: Ad rate and utilization rate Figure 7: MONO29’s quarterly revenue (Bt/min) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0
117%
(Bt'mn)
116% 98%
86%
8,069 8,486 8,785
92%
98%
90%
12,618 13,806
16,639
20,391 56% 15,947
120%
350
100%
300
80%
250
60%
200
40%
150
20%
100
0% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Ad rate
Utilization rate
Source: MONO, KT Zmico Research
50 0
315
162 113
192
332
201 148
142
75 35 3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
Source: NBTC, KT Zmico Research
This year, the management expects the ad rate at Bt29,000/min, +71%YoY, with a 100% utilization rate, which implies total ad revenue of around Bt1,900mn. We view that such an ad rate hike looks too high and assume the ad rate at Bt26,000/min and a utilization rate around 95% for 17E, and an ad rate of Bt33,800/min and a utilization rate of 95% for 18E. Our revenue forecast is at Bt1,623mn in 17E and Bt2,100mn in 18E, +63%YoY and 30%YoY, respectively. For other business, we forecast revenue of the mobile business to decline further to Bt840mn REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 6
3Q16
4Q16
while there will be box office revenue from T Moment movies of around Bt60mn for three movies. Like other digital TV, the phase of high cost growth has passed. The gross margin will increase from 21.3% last year to 38.5% this year and 46.1% next year. MONO plans to spend around Bt1,000 on acquisition of content, including self‐made Thai drama series and movies under T Moment. Figure 8: Ad rate and utilization rate Figure 9: Gross profit margin (Bt'mn) 3,500
3,224
2,500 2,000 1,500
1,905 1,407
500
1,526
920
1,122
2013
996
624
0 2014 TV
840 840
2015
2016
MVAS
59% 46%
50%
38%
34%
40% 30%
882
975
1,000
2,077
64%
60%
2,732
3,000
70%
1,623
2,110
21%
20%
13%
10% 2017E
2018E
0% 2012
Other
Source: MONO, KT Zmico Research
2013
2014
2015
2016
2017E
2018E
Source: MONO, KT Zmico Research
We expect the bottom line to show a strong turnaround and there should be no quarterly loss going forward. We forecast net profit of Bt310mn this year, turning from a loss of Bt250mn last year, and Bt648mn next year, +109%YoY. Net profit in 1Q17 should turn to profit from a loss of Bt80mn in 1Q16. The company has actually turned a profit since 2Q16 with a one‐time loss occurring in 4Q16. General mandate for PP to be submitted for shareholders’ approval MONO will ask shareholders for approval of a general mandate for private placement. The total additional shares will be 334mn shares or about 10% control dilution. MONO did the same thing last year and the PP was just sold to private investors in January. The management said that the general mandate for PP will give the firm financial flexibility and MONO intends to use it when it sees potential investment opportunities. Therefore, among TV players, MONO has apparent risk on a capital call. Figure 10: Earnings revision Year‐end 31 Dec Revenue (Bt'mn) EBITDA (Bt'mn) Share of profit (Bt'mn) Net profit (Bt'mn) % growth Core profit (Bt'mn) % growth Core EPS (Bt) Core EPS growth (%) Gross margin (%) EBITDA margin (%)
Previous
2017 New
%chg
Previous
2018 New
%chg
Previous
2019 New
%chg
2,689 1,241 0 247 ‐199% 247 ‐221% 0.08 ‐199% 38.4% 46.2%
2,732 1,421 0 310 ‐224% 310 ‐252% 0.09 ‐215% 38.5% 52.0%
2% 14% n.a. 25% ‐25% 25% ‐31% 16% ‐16% 0% 6%
3,052 1,570 0 493 100% 493 100% 0.15 100% 44.9% 51.5%
3,224 1,834 0 648 109% 648 109% 0.19 109% 46.1% 56.9%
6% 17% n.a. 31% 9% 31% 9% 21% 9% 1% 5%
3,435 1,916 0 745 51% 745 51% 0.23 51% 50.2% 55.8%
3,651 2,187 0 933 44% 933 44% 0.27 44% 51.0% 59.9%
6% 14% n.a. 25% ‐7% 25% ‐7% 16% ‐7% 1% 4%
Sources: KT Zmico Research REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 6
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 Gain (loss) from affiliates Extra Items Non‐controlling Net profit Reported EPS Fully diluted 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 (%)
2013 1,407 (582) 826 (373) 512 (59) 452 (3) 91 540 (39) 0 0 0 501 0.16 0.11 501 0.16 0.43
2014 1,526 (1,011) 515 (588) 217 (290) (73) (81) 77 (77) 64 0 0 0 (12) (0.00) (0.00) (12) (0.00) 0.16
2015 1,893 (1,653) 240 (680) 200 (639) (439) (133) 32 (540) 54 0 0 0 (487) (0.16) (0.11) (487) (0.16) 0.00
2016 2,077 (1,634) 443 (525) 802 (885) (83) (145) 36 (192) (10) (2) (46) 0 (250) (0.08) (0.05) (203) (0.08) 0.00
2013 2,277 416 7 0 582 105 3,386 17 15 293 140 3,093 3,386
2014 998 578 8 0 3,569 248 5,400 13 409 2,489 308 2,911 5,400
2015 195 554 10 0 4,154 365 5,278 146 734 2,854 310 2,424 5,278
2016 87 530 9 51 4,315 400 5,392 196 1,342 3,026 320 2,366 5,392
2017E 2,732 (1,681) 1,051 (559) 1,421 (929) 492 (141) 36 387 (77) 0 0 0 310 0.09 0.07 310 0.09 0.00
2013 501 6 59 (131) 436 (357) 0 (357) (21) 2,720 (585) 0 2,115 2,194 79 0.02
2014 (12) 12 290 (118) 171 (1,659) 0 (1,659) 384 0 (174) 0 210 (1,279) (1,488) (0.32)
2013 ‐8.5% ‐25.4% ‐31.9% 58.7% 36.4% 32.1% 35.6% 35.6% 7.2%
2015 (524) 33 639 (259) (111) (1,139) 0 (1,138) 441 52 (0) (61) 432 (809) (1,249) (0.27)
2014 8.5% ‐57.6% ‐102.5% 33.8% 14.2% ‐4.8% ‐0.8% ‐0.8% 83.8%
2017E 363 697 9 51 4,386 408 5,914 241 1,003 2,483 498 3,430 5,914
2016 (250) 59 885 (430) 264 (1,042) (83) (1,125) 658 95 (0) 0 753 (107) (862) (0.19)
2015 24.0% ‐7.8% 3790.5% 12.7% 10.6% ‐23.2% ‐25.7% ‐25.7% 9.9%
2018E 586 822 9 51 4,433 414 6,315 241 903 2,237 498 4,078 6,315
2017E 310 0 929 (424) 815 (1,001) 0 (1,001) (294) 755 0 0 461 276 (186) (0.04)
2016 9.7% 271.8% ‐50.3% 21.3% 38.6% ‐4.0% ‐12.0% ‐9.8% ‐5.0%
2018E 3,224 (1,737) 1,487 (597) 1,834 (943) 891 (118) 37 810 (162) 0 0 0 648 0.19 0.14 648 0.19 0.00
2018E 648 0 943 (278) 1,313 (990) 0 (990) (100) 0 0 0 (100) 223 323 0.07
2017E 31.5% 77.1% ‐214.5% 38.5% 52.0% 18.0% 11.3% 11.3% 20.0%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 6
2018E 18.0% 29.1% 109.3% 46.1% 56.9% 27.6% 20.1% 20.1% 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, TFD, THANI.
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 UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 6 of 6
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
