Underperform (FY16E TP Bt5.20)
VGI Global Media Underperform (FY16E TP Bt5.20)
Company Update
Close Bt4.50
Media & Publishing August 7, 2015
Earnings upgrade/Earnings downgrade/Overview unchanged
Gloomy outlook Price Performance (%)
Maintain “Underperform” with revised SOTP‐based TP of Bt5.20 In light of the soft earnings results in 1QFY16 along with the impact of the continued weakening of the economy and consumption, we significantly downgrade VGI’s net profit in FY16‐17E and lower the SOTP‐ based target price to Bt5.20, vs. Bt5.60 previously. We still like VGI’s prospects in the longer term as the majority of its revenue comes from the BTS network with potential for expansion, and is thus quite stable; nevertheless, it is likely to take time for the economy to pick up. We maintain our “Underperform” rating for VGI.
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
0.161
0.188
KT ZMICO vs. consensus Share data
‐16.1%
‐20.7%
Reuters / Bloomberg
Media & Publishing 6,864.32
Paid‐up Shares (m)
0.10
Par (Bt) Market cap (Bt bn / US$ m) Foreign limit / actual (%)
31.00/879.00 49.00/4.47
52 week High / Low (Bt)
7.30/4.20
Avg. daily T/O (shares 000)
18,408.00 2.03
NVDR (%) Estimated free float (%)
29.47
Beta
0.92
URL
www.vgi.co.th ‐
CGR
Raenoo Bhandasukdi Analyst no. 17989 [email protected] 66 (0) 2695‐5836
Poor outlook expected in 2HFY16E VGI revised down its revenue growth target for FY16 to ‐26%, vs. ‐12% previously expected, owing to the continued weakening of the economic outlook. The company lowered its revenue target for BTS‐related and other media, but slightly upgraded the revenue target for advertising management for office buildings. BTS‐related ad revenue is likely to be directly impacted by the weak industry; meanwhile, ad revenue from other media will be impacted by the lower‐than‐expected selling performance of new LCD screens at Victory Monument. Currently, the advertising industry remains sluggish with the major advertiser, Unilever, to cut its advertising budget in Thailand in 2H15. New business in pipeline Revenue from advertising management on Clock Tower operated by Midas Global Media Co., Ltd. (VGI holds 20% investment stake) will begin soon. In the 1st phase, the project will start in ten provinces with expected revenue of Bt50‐70mn. It is likely to take 2‐3 years until breakeven. LED Advance (VGI’s latest 20%‐affiliated co.) started contributing shared profit to VGI in Jun‐15, but in a small portion, and it is expected to acquire more aviation‐related media management companies soon. Moreover, VGI, incorporated with BTS, is in the process of seeking partners to launch BTS‐WIFI, both in‐train and in‐station, to expand advertising revenue in the longer term. Lower earnings projections in FY16‐17E by 20% and 16% We lower VGI’s normalized profit in FY16‐17E by 20% and 16% to Bt885mn and Bt1,023mn, respectively, by lowering the revenue assumptions by 14% and 13% to Bt2.1bn and Bt2.3bn, respectively, and also lower the gross profit margin in both years. In FY16E, we expect revenue to decline by 28%, below VGI’s target of ‐26%. Financials and Valuation FY Ended 31 Mar Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm. profit (Btmn) Norm. EPS (Bt) Norm. EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Mar PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
FY13 2,838 902 0.301 902 0.301 8.01 0.270 0.607 FY13 14.97 9.80 7.41 6.00 85.30 cash
FY14 3,149 1,146 0.334 1,146 0.334 11.08 0.320 0.569 FY14 13.48 8.91 7.91 7.11 60.71 cash
FY15 2,963 999 0.122 838 0.146 (56.38) 0.176 0.266 FY15 30.91 10.09 16.89 3.91 44.29 18.75
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
FY16E 2,123 930 0.135 885 0.129 (11.44) 0.116 0.256 FY16E 34.90 11.14 17.59 2.58 51.86 21.88
FY17E 2,303 1,023 0.149 1,023 0.149 15.64 0.134 0.286 FY17E 30.18 9.64 15.75 2.98 55.07 8.52
Figure 1: Summary of SOTP‐based valuation for VGI Business
% Holding
VGI’s existing business
MACO
24.96
SOTP‐based
Valuation Method
Value to VGI (Bt)*
DCF (WACC 11%)
5.00
Consensus target price of Bt1.60
0.20
5.20
Source: KT ZMICO Research, Note: *not including shares reserved for VGI‐W1 Figure 2: VGI’s PER band and sensitivity of market prices based on PER at different standard deviation levels (X) 60 50
+2 S.D. +1 S.D. Avg.
40 30
-1 S.D.
20
-2 S.D.
Jul-15
Apr-15
May-15
Jan-15
Mar-15
Dec-14
Sep-14
Nov-14
Jul-14
Aug-14
Apr-14
Jun-14
Mar-14
Feb-14
Dec-13
Oct-13
Nov-13
Jul-13
Aug-13
Apr-13
Jun-13
Mar-13
Feb-13
Dec-12
Oct-12
0
Nov-12
10
FY16E +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD ‐2.0SD ‐2.5SD
PER (x) 46.2 42.1 38.0 33.9 29.8 25.7 21.6 17.5
Implied market price (Bt) 5.96 5.43 4.90 4.37 3.84 3.32 2.79 2.26
Upside/Downside vs. current market price (%) 32.4 20.7 8.9 (2.8) (14.6) (26.3) (38.1) (49.8)
Source: Bloomberg, KT ZMICO Research Figure 3: Key changes to our assumptions and revision to earnings forecasts FY16E Current
Previous
Advertising revenue (Btmn)
2,123
2,460
% YoY
(28.3)
(17.4)
BTS-related (% YoY)
FY17E %chg (13.7)
Current
Previous
2,303
2,643
8.5
7.4
3.0
14.5
10.0
8.3
Office building & Others (% YoY)
13.8
107.8
23.6
3.0
Gross profit margin (%)
%chg (12.9)
66.6
72.9
68.6
73.6
Norm. profit (Btmn)
885
1,119
(20.9)
1,023
1,228
(16.7)
Net profit (Btmn)
930
1,119
(16.9
1,023
1,228
(16.7)
Source: KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
Financial tables PROFIT & LOSS (Btm) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Equity earnings Other income / exp. EBT Corporate tax Minority interests Net profit Reported EPS Fully diluted EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btm) Cash and equivalents Inventories PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Minority interests Shareholder equity Total liab. & shareholder equity CASH FLOW (Btm) Net income Depreciation & amortization Change in working capital FX, non‐cash adjustment & others 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 (%) Core EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%) FINANCIAL QUALITY Total debt to capital employed (x) Net debt to equity (x) Interest coverage (x)
FY12 1,977 (1,295) 682 (282) 495 (95) 400 (1) 0 27 427 (148) (0) 278 0.28 0.28 278 0.28 0.40
FY13 2,838 (1,289) 1,548 (394) 1,250 (95) 1,155 (2) 0 34 1,187 (285) 0 902 0.301 0.301 902 0.301 0.270
FY14 3,149 (1,342) 1,807 (434) 1,459 (86) 1,374 (1) (1) 47 1,419 (273) 0 1,146 0.334 0.334 1,146 0.334 0.320
FY15 2,963 (1,325) 1,638 (419) 1,372 (153) 1,219 (10) 15 (115) 1,109 (272) 0 838 0.122 0.122 999 0.146 0.176
FY12 381 0 228 705 1,314 0 0 1,021 0 293 1,314
FY13 1,254 0 473 852 2,579 0 0 758 0 1,821 2,579
FY14 503 0 923 1,315 2,741 0 0 788 0 1,953 2,741
FY15 187 4 1,262 1,833 3,286 530 0 1,457 0 1,829 3,286
FY12 278 95 (47) 16 343 (69) 11 (59) (1) 0 (400) 0 (401) (117) 284 0.28
FY13 902 95 (437) 0 560 (321) 17 (304) 0 1,058 (440) 0 618 873 255 0.09
FY14 1,146 86 60 0 1,292 (570) (459) (1,029) 1 0 (1,014) 0 (1,013) (750) 262 0.08
FY15 838 153 79 0 1,070 (600) (354) (954) 189 344 (965) 0 (432) (316) 116 0.02
FY12 41.1 47.0 60.7 34.5 25.0 20.2 14.1 14.1 34.7
FY13 43.5 152.6 8.0 54.6 44.0 40.7 31.8 31.8 24.0
FY14 11.0 16.7 11.1 57.4 46.3 43.6 36.4 36.4 19.2
FY15 (5.9) (6.0) (56.4) 55.3 46.3 41.1 28.3 33.7 24.5
FY12 0.00 cash cash
FY13 0.00 cash cash
FY14 0.00 cash cash
FY15 0.22 cash cash
FY16E 2,123 (709) 1,414 (340) 1,247 (172) 1,074 (10) 6 80 1,151 (221) 0 930 0.135 0.135 885 0.129 0.116
FY17E 2,303 (724) 1,579 (345) 1,417 (184) 1,233 0 7 39 1,279 (256) 0 1,023 0.149 0.149 1,023 0.149 0.134
FY16E 146 4 1,337 1,711 3,197 530 0 1,441 0 1,756 3,197
FY17E 363 4 1,303 1,746 3,415 530 0 1,455 0 1,961 3,416
FY16E 930 172 127 0 1,229 (268) 0 (268) 0 0 (1,003) 0 (1,003) (41) 961 0.14
FY17E 1,023 184 81 0 1,288 (150) 0 (150) 0 0 (921) 0 (921) 217 1,138 0.17
FY16E (28.3) (9.1) (11.4) 66.6 58.7 50.6 43.8 41.7 19.2
FY17E 8.5 13.7 15.6 68.6 61.5 53.6 44.4 44.4 20.0
FY16E 0.23 cash cash
FY17E 0.21 cash cash
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
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 return over six months period because of specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to below market return over six months period because of 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
Company Update
Close Bt4.50
Media & Publishing August 7, 2015
Earnings upgrade/Earnings downgrade/Overview unchanged
Gloomy outlook Price Performance (%)
Maintain “Underperform” with revised SOTP‐based TP of Bt5.20 In light of the soft earnings results in 1QFY16 along with the impact of the continued weakening of the economy and consumption, we significantly downgrade VGI’s net profit in FY16‐17E and lower the SOTP‐ based target price to Bt5.20, vs. Bt5.60 previously. We still like VGI’s prospects in the longer term as the majority of its revenue comes from the BTS network with potential for expansion, and is thus quite stable; nevertheless, it is likely to take time for the economy to pick up. We maintain our “Underperform” rating for VGI.
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
0.161
0.188
KT ZMICO vs. consensus Share data
‐16.1%
‐20.7%
Reuters / Bloomberg
Media & Publishing 6,864.32
Paid‐up Shares (m)
0.10
Par (Bt) Market cap (Bt bn / US$ m) Foreign limit / actual (%)
31.00/879.00 49.00/4.47
52 week High / Low (Bt)
7.30/4.20
Avg. daily T/O (shares 000)
18,408.00 2.03
NVDR (%) Estimated free float (%)
29.47
Beta
0.92
URL
www.vgi.co.th ‐
CGR
Raenoo Bhandasukdi Analyst no. 17989 [email protected] 66 (0) 2695‐5836
Poor outlook expected in 2HFY16E VGI revised down its revenue growth target for FY16 to ‐26%, vs. ‐12% previously expected, owing to the continued weakening of the economic outlook. The company lowered its revenue target for BTS‐related and other media, but slightly upgraded the revenue target for advertising management for office buildings. BTS‐related ad revenue is likely to be directly impacted by the weak industry; meanwhile, ad revenue from other media will be impacted by the lower‐than‐expected selling performance of new LCD screens at Victory Monument. Currently, the advertising industry remains sluggish with the major advertiser, Unilever, to cut its advertising budget in Thailand in 2H15. New business in pipeline Revenue from advertising management on Clock Tower operated by Midas Global Media Co., Ltd. (VGI holds 20% investment stake) will begin soon. In the 1st phase, the project will start in ten provinces with expected revenue of Bt50‐70mn. It is likely to take 2‐3 years until breakeven. LED Advance (VGI’s latest 20%‐affiliated co.) started contributing shared profit to VGI in Jun‐15, but in a small portion, and it is expected to acquire more aviation‐related media management companies soon. Moreover, VGI, incorporated with BTS, is in the process of seeking partners to launch BTS‐WIFI, both in‐train and in‐station, to expand advertising revenue in the longer term. Lower earnings projections in FY16‐17E by 20% and 16% We lower VGI’s normalized profit in FY16‐17E by 20% and 16% to Bt885mn and Bt1,023mn, respectively, by lowering the revenue assumptions by 14% and 13% to Bt2.1bn and Bt2.3bn, respectively, and also lower the gross profit margin in both years. In FY16E, we expect revenue to decline by 28%, below VGI’s target of ‐26%. Financials and Valuation FY Ended 31 Mar Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm. profit (Btmn) Norm. EPS (Bt) Norm. EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Mar PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
FY13 2,838 902 0.301 902 0.301 8.01 0.270 0.607 FY13 14.97 9.80 7.41 6.00 85.30 cash
FY14 3,149 1,146 0.334 1,146 0.334 11.08 0.320 0.569 FY14 13.48 8.91 7.91 7.11 60.71 cash
FY15 2,963 999 0.122 838 0.146 (56.38) 0.176 0.266 FY15 30.91 10.09 16.89 3.91 44.29 18.75
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
FY16E 2,123 930 0.135 885 0.129 (11.44) 0.116 0.256 FY16E 34.90 11.14 17.59 2.58 51.86 21.88
FY17E 2,303 1,023 0.149 1,023 0.149 15.64 0.134 0.286 FY17E 30.18 9.64 15.75 2.98 55.07 8.52
Figure 1: Summary of SOTP‐based valuation for VGI Business
% Holding
VGI’s existing business
MACO
24.96
SOTP‐based
Valuation Method
Value to VGI (Bt)*
DCF (WACC 11%)
5.00
Consensus target price of Bt1.60
0.20
5.20
Source: KT ZMICO Research, Note: *not including shares reserved for VGI‐W1 Figure 2: VGI’s PER band and sensitivity of market prices based on PER at different standard deviation levels (X) 60 50
+2 S.D. +1 S.D. Avg.
40 30
-1 S.D.
20
-2 S.D.
Jul-15
Apr-15
May-15
Jan-15
Mar-15
Dec-14
Sep-14
Nov-14
Jul-14
Aug-14
Apr-14
Jun-14
Mar-14
Feb-14
Dec-13
Oct-13
Nov-13
Jul-13
Aug-13
Apr-13
Jun-13
Mar-13
Feb-13
Dec-12
Oct-12
0
Nov-12
10
FY16E +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD ‐2.0SD ‐2.5SD
PER (x) 46.2 42.1 38.0 33.9 29.8 25.7 21.6 17.5
Implied market price (Bt) 5.96 5.43 4.90 4.37 3.84 3.32 2.79 2.26
Upside/Downside vs. current market price (%) 32.4 20.7 8.9 (2.8) (14.6) (26.3) (38.1) (49.8)
Source: Bloomberg, KT ZMICO Research Figure 3: Key changes to our assumptions and revision to earnings forecasts FY16E Current
Previous
Advertising revenue (Btmn)
2,123
2,460
% YoY
(28.3)
(17.4)
BTS-related (% YoY)
FY17E %chg (13.7)
Current
Previous
2,303
2,643
8.5
7.4
3.0
14.5
10.0
8.3
Office building & Others (% YoY)
13.8
107.8
23.6
3.0
Gross profit margin (%)
%chg (12.9)
66.6
72.9
68.6
73.6
Norm. profit (Btmn)
885
1,119
(20.9)
1,023
1,228
(16.7)
Net profit (Btmn)
930
1,119
(16.9
1,023
1,228
(16.7)
Source: KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
Financial tables PROFIT & LOSS (Btm) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Equity earnings Other income / exp. EBT Corporate tax Minority interests Net profit Reported EPS Fully diluted EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btm) Cash and equivalents Inventories PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Minority interests Shareholder equity Total liab. & shareholder equity CASH FLOW (Btm) Net income Depreciation & amortization Change in working capital FX, non‐cash adjustment & others 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 (%) Core EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%) FINANCIAL QUALITY Total debt to capital employed (x) Net debt to equity (x) Interest coverage (x)
FY12 1,977 (1,295) 682 (282) 495 (95) 400 (1) 0 27 427 (148) (0) 278 0.28 0.28 278 0.28 0.40
FY13 2,838 (1,289) 1,548 (394) 1,250 (95) 1,155 (2) 0 34 1,187 (285) 0 902 0.301 0.301 902 0.301 0.270
FY14 3,149 (1,342) 1,807 (434) 1,459 (86) 1,374 (1) (1) 47 1,419 (273) 0 1,146 0.334 0.334 1,146 0.334 0.320
FY15 2,963 (1,325) 1,638 (419) 1,372 (153) 1,219 (10) 15 (115) 1,109 (272) 0 838 0.122 0.122 999 0.146 0.176
FY12 381 0 228 705 1,314 0 0 1,021 0 293 1,314
FY13 1,254 0 473 852 2,579 0 0 758 0 1,821 2,579
FY14 503 0 923 1,315 2,741 0 0 788 0 1,953 2,741
FY15 187 4 1,262 1,833 3,286 530 0 1,457 0 1,829 3,286
FY12 278 95 (47) 16 343 (69) 11 (59) (1) 0 (400) 0 (401) (117) 284 0.28
FY13 902 95 (437) 0 560 (321) 17 (304) 0 1,058 (440) 0 618 873 255 0.09
FY14 1,146 86 60 0 1,292 (570) (459) (1,029) 1 0 (1,014) 0 (1,013) (750) 262 0.08
FY15 838 153 79 0 1,070 (600) (354) (954) 189 344 (965) 0 (432) (316) 116 0.02
FY12 41.1 47.0 60.7 34.5 25.0 20.2 14.1 14.1 34.7
FY13 43.5 152.6 8.0 54.6 44.0 40.7 31.8 31.8 24.0
FY14 11.0 16.7 11.1 57.4 46.3 43.6 36.4 36.4 19.2
FY15 (5.9) (6.0) (56.4) 55.3 46.3 41.1 28.3 33.7 24.5
FY12 0.00 cash cash
FY13 0.00 cash cash
FY14 0.00 cash cash
FY15 0.22 cash cash
FY16E 2,123 (709) 1,414 (340) 1,247 (172) 1,074 (10) 6 80 1,151 (221) 0 930 0.135 0.135 885 0.129 0.116
FY17E 2,303 (724) 1,579 (345) 1,417 (184) 1,233 0 7 39 1,279 (256) 0 1,023 0.149 0.149 1,023 0.149 0.134
FY16E 146 4 1,337 1,711 3,197 530 0 1,441 0 1,756 3,197
FY17E 363 4 1,303 1,746 3,415 530 0 1,455 0 1,961 3,416
FY16E 930 172 127 0 1,229 (268) 0 (268) 0 0 (1,003) 0 (1,003) (41) 961 0.14
FY17E 1,023 184 81 0 1,288 (150) 0 (150) 0 0 (921) 0 (921) 217 1,138 0.17
FY16E (28.3) (9.1) (11.4) 66.6 58.7 50.6 43.8 41.7 19.2
FY17E 8.5 13.7 15.6 68.6 61.5 53.6 44.4 44.4 20.0
FY16E 0.23 cash cash
FY17E 0.21 cash cash
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
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 return over six months period because of specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to below market return over six months period because of 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
