Initiate Coverage : WORK 23 April 2015
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BUY
TP: Bt49.00
Closing price: Bt40.50 Upside/downside: +21.0%
Sector Media & Publishing
Paid-up shares (shares bn) 298.04
Market capitalization (Bt bn) 12.29
Free float (%) 27.49
12-mth daily avg. turnover (Bt mn) 28.32
12-mth trading range (Bt) 49.64/17.07
Major shareholders (%)
Prapas Cholsaranon 26.07
Phanya Nirunkul 25.95
Mindo Asia Investments 10.74
Thai NVDR Co., Ltd. 3.07
Dentsu Media (Thailand) 3.00
Source: SET, AWS estimates
Thailand Research Department
Mr. Warut Siwasariyanon,
License, No. 17923
Tel: 02 680 5041
Ms. Sukanya Leelarwerachai
Assistant Analyst
Workpoint Entertainment PCL. (WORK)
The fast fish eats the slow fish
► Impressive increase in TV rating and now ranked No.3.
► We project EPS CAGR of 316% during 2015-16, driven by
recovery in spending on advertising and doubling ad rate.
► Initiate coverage with BUY recommendation and 2015 target
price of Bt49.00.
No ranked No. 3 on TV
Workpoint TV’s rating has improved significantly since launching
in April 2014. The company has also removed some of its content
from Channels 5 & 9 to broadcast on its own channel. Nielsen
Thailand’s latest TV ratings ranked WORK’s channel No. 3. The
higher ranking will undoubtedly enable WORK to at least double
its average advertising rates. In addition, the company plans to
add five branded TV shows which will be produced to order for
the company’s main sponsors and it will launch five concerts and
plays after the grand opening of its own multi-purpose theatre,
KBank Siam-Pic-Ganesha, on 31 Mar.
Expect exponential net profit CAGR of 316% during 2015-16
For 2015-16, we expect WORK to post strong normalized earnings
CAGR of 316%. This would be supported by: (1) First full-year
contribution from operating its own digital TV channel. It was able to
maintain its average rating above 0.5 (represents 600K viewers
per minute) compared with a rating of 0.20 in Apr 2014. Therefore,
its average ad rate should at least double to approximately
Bt50,000/min this year. (2) Improvement in the advertising industry
from the economic recovery. (3) Better cost control and production
cost savings from using foreign programs such as Buddha's
Prophet World instead of producing a Thai drama series.
Initiate coverage with a BUY recommendation
Our 2015 target price is Bt49.00 based on the discounted cash flow
(DCF) method (WACC 11.2%, Terminal growth 2.0% after TV
license expire on 2029). Although WORK is currently trading at a
high PE of 65x, with expected 316% CAGR EPS growth in 2015-16,
the PEG ratio is at only 0.21x. The current share price of Bt40.50
offers an upside of 21.0% to our target. We recommend BUY.
Financial Highlights
Unit: Btmn 2013 2014 2015E 2016E
Revenue 2,167 2,214 2,843 3,537
Net Profit 257 21 185 360
EPS (Bt) 1.00 0.08 0.62 1.21
EPS Growth (%) -36% -92% 676% 95%
P/E (x) 18.9 375.0 65.2 33.5
P/BV(x) 3.8 5.3 6.9 6.5
DPS (Bt) 0.52 0.44 0.44 0.85
Div. Yield (%) 2% 1% 1% 2%
Initiate Coverage : WORK 23 April 2015
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From the leading game show provider on analog TV to a top
five digital TV channel
WORK has been a leading content provider on analog TV in Thailand for over
25 years. On 13 Jan 2014, Thai Broadcasting Company Limited, which is 99%
owned by WORK, officially won the bid for a 15-year Standard Definition
Terrestrial Digital TV Variety Channel license. WORK moved its “Workpoint TV”
channel from the satellite platform to the digital channel on 25 Apr 2014 which
resulted in a significant change in the company’s revenue structure in 2014 and
is expected to be fully reflected in 2015 as shown in Figure 1.
At present, WORK operates three main business lines: (1) Workpoint TV on its
digital channel, (2) TV production on analog TV, (3) events and concerts.
Workpoint TV: Higher ratings…higher ad rate
From Apr 2014 – Feb 2015, Workpoint TV’s ratings have been on an upward
trend (Figure 2) as a result of moving popular programs from MCOT and Ch5 to
its digital channel, programs such as Ching-Cha-Sawan, Khun-Pra-Chuay,
Identity Thailand. Moreover, new content has been well received, such as
Pridsana-Falap, Sai-Lub-Jup-Kae, 7 Wan-Jong-Wen.
Although 2014 was not a good year for advertising spending due to the political
unrest in 1H14, WORK still successfully adjusted its adverting prices (ad rate)
up in 2H14. In 2015, we expect to see a full year of positive effect from Workpoint
TV. It should be a key driver and the highest revenue contributor for the company
this year due to:
(1) Management is confident that Workpoint TV will able to maintain its average
rating above 0.5 (represents 600K viewers per minute). Compared with its
rating of 0.20 in Apr 2014, average ad rate should at least double to
approximately Bt50,000/min this year.
2013 2014
2015F Figure 1: Operating Revenue by Business Unit
Source: WORK, AWS estimates
Impressive increase in
its ratings in the first
year of operation.
Initiate Coverage : WORK 23 April 2015
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(2) Economic improvement will boost advertising spending and slot utilization
rate should jump to 70% from 51% last year.
(3) Adding five branded TV shows that will be produced to order for its main
sponsors (Figure 3). These TV programs will receive subsidies to cover
production costs, which helps reduce the risk of a loss.
(4) Broadcasting Indian TV series Buddha's Prophet World during Mar-Aug
2015 on Sat-Sun at 10.00-11.00 A.M. and rerun 8.30-9.30 P.M. The show
has received a good response from viewers and helps WORK reduce cost
of production by delaying broadcasting Thai dramas to 2H15, as the cost of
acquiring the foreign program appears to be lower than in-house production
of a drama series.
Figure 2: TV ratings
Source: AGB Neilsen: TV Rating All Target 4+/24 hrs.
Figure 3: Branded TV content & seasonal shows
Source: Company data
Initiate Coverage : WORK 23 April 2015
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As for TV production on analog TV, WORK is now only doing Ching 100
Sunshine Day and Ching 100 Holiday which are still on Ch3. The revenue
contribution from this business unit will be a smaller proportion, but may increase
in sales from an adjustment in ad rate each year.
More proactive in events, concerts and plays
Event marketing business should be bright with better market sentiment and
many new projects scheduled to launch this year (Figure 4). In addition, on 31
Mar 2015, WORK held the grand opening of its own multi-purpose theatre,
KBank Siam-Pic-Ganesha, located on the 7th floor of Siamsquare One with a
15-year lease. Sponsorship by KBank and advertising revenue should cover
fixed costs for the theater (excluding cost of shows). WORK plans to launch at
least five concerts and plays at the new theater this year and targets additional
revenue of up to Bt200mn.
Strategic partnership with Dentsu and Mindo
On May 2014, WORK announced a capital increase by issuing 8.9mn new
common shares for a private placement (PP) with Dentsu Media (Thailand), a
subsidiary of Dentsu Inc (Tokyo) who is a top media agency in the world and
also one of the top 5 media agencies in Thailand. Dentsu will help bring in quality
finished TV programs from Japan, develop new TV programs and also support
advertising spending for Workpoint TV.
On Nov 2014, WORK announced another capital increase by issuing 32mn new
common shares to Mindo Asia Investment Limited (MINDO), incorporated in
Hong Kong, which is a wholly owned subsidiary of Lombard Asia IV L.P. a private
equity fund focusing on long-term investments in Southeast Asian companies.
This capital increase strengthens WORK’s financial status with funded debt to
equity not exceeding 0.5x and enough working capital and capital spending for
this year.
Figure 4: Event businesses in 2015
Source: Company data
Figure 5: Concerts and plays in 2015
Dentsu and Mindo will
strengthen an already
strong network and
financial status.
Many events and
concerts to boost
revenue from this year
onward.
Initiate Coverage : WORK 23 April 2015
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Industry outlook
The launch of digital terrestrial TV on 25 Apr 2014 added more players to the
Bt80bn TV broadcasting industry but advertising spending remained unchanged
in the first year due to the local political unrest and economic slowdown.
According to AGB Nielsen, of the 60.66mn viewers in the country, the number
of digital TV viewers has reached more than 15.6mn, representing 25.7% of the
market, up from 9% in Apr 2014. Channel 7 and Channel 3 are still the top two
channels in the country, but Workpoint TV has made a strong move and is
ranked #3 in terms of audience share and audience ratings.
In 2015, Media Agency Association of Thailand projects advertising spending
will grow 4.7% YoY mainly from digital TV, digital and transit media. Note that
advertising spending typically slow in the first quarter and then picks up as
normal seasonality following the country’s season for consumption.
Meanwhile, on 22 Apr 2015, NBTC allowed a delay of the second-year of the
license fee payment due in May after the Finance Ministry told that it was within
the NBTC’s authority to postpone the payment. Although license fees are
already budgeted into operators’ income statements, this will slightly boost
bottom lines from interest saving and would help company cash flows.
Figure 6: Advertising spending Unit: Btmn
Source: The Nielsen Company (Thailand), MAAT
Bright earnings outlook for 2015 and good prospects in the medium term
We expect operating revenue to increase an impressive 28%YoY in 2015 and
24% YoY in 2016 while earnings should post significant growth of 789% YoY in
2015 and 95% YoY in 2016. This is based on:
(1) Thailand’s economy is expected to expand at least 3.0% in 2015 while a drop
in crude oil price will encourage consumption and spending on advertising and
event marketing.
(2) The trend up in Workpoint TV’s ratings will allow the company to adjust up its
ad rate and push up utilization rate of advertising airtime.
Bright earnings outlook
for 2015
Advertising industry
should shine in in 2015.
Initiate Coverage : WORK 23 April 2015
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(3) With sponsorships with companies such as KBank and Carabao and strong
strategic shareholders like Dentsu and Mindo, we expect to see more creative
TV programs and additional synergy effect from this year onward.
(4) With the opening of KBank Siam-Pic-Ganesha, WORK is expected to push
up non-TV revenue, especially from concerts and plays with additional
revenue targeted at up to Bt200mn this year.
(5) Profitability to improve from economy of scale after advertising spending
returns to normal. WORK is also trying to control TV production costs, for
example using foreign programs instead of producing Thai drama series.
Figure 7: Operating revenue outlook Figure 8: Earnings outlook
Source: Company data, AWS estimates Source: Company data, AWS estimates
Initiate coverage with a BUY recommendation
Our 2015 target price is Bt49.00 based on the discounted cash flow (DCF)
method (WACC 11.2%, Terminal growth 2.0% after TV license expires in 2029).
Although WORK is currently trading at a high PE of 65x, with expected 316%
CAGR EPS growth in 2015-16, PEG ratio is only 0.21x. The current share price
of B40.50 offers an upside of 21.0% to our target. We recommend BUY.
Concerns
(1) Advertising expenditure is sensitive to economic sentiment and unexpected
shocks such as political unrest. Slower economic growth than market
expectation will slow advertising and event marketing spending and also the
company’s revenue.
(2) Fierce competition among the 24 digital TV channels is an obstacle for WORK
to raise ad rate.
(3) Concerts and plays may not be as popular as expected.
Unit: Btmn Unit: Btmn
22
197
383
2015E 2016E
2,214
2,843
3,537
2015E 2016E
Recommend BUY with
2015 target price of
Bt49.00/share
Initiate Coverage : WORK 23 April 2015
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Key Financial Ratios 2013 2014 2015E 2016E 2017E
Operating Revenue Growth (%) 1% 2% 28% 24% 19%
Net Profit Growth (%) -36% -92% 789% 95% 88%
EPS Growth (%) -36% -92% 676% 95% 88%
Gross Profit Margin (%) 38% 31% 36% 39% 45%
Operating Profit Margin (%) 15% 1% 8% 13% 21%
EBITDA Margin (%) 25% 21% 23% 26% 32%
Net Profit Margin (%) 11% 1% 7% 11% 17%
Effective tax rate (%) 25% 19% 20% 20% 20%
ROA (%) 11% 0.4% 4% 7% 14%
ROE (%) 16% 1% 11% 20% 33%
Net Debt to Equity (x) 0.26 0.56 0.52 0.43 0.33
EPS (Bt) 1.00 0.08 0.62 1.21 2.27
BVPS (Bt) 4.94 5.68 5.87 6.23 6.91
DPS (Bt) 0.52 0.44 0.44 0.85 1.59
Dividend Payout Ratio 52% 556% 70% 70% 70%
P/E (x) 18.9 375.0 65.2 33.5 17.8
P/BV (x) 3.8 5.3 6.9 6.5 5.9
EV/EBITDA (x) 28 31 22.83 16 11
Div. Yield (%) 2% 1% 1% 2% 4%
Income Statement
Unit: Btmn 2013 2014 2015E 2016E 2017E
Operating Revenue 2,167 2,214 2,843 3,537 4,204
Total Revenue 2,186 2,270 2,899 3,592 4,260
COGS 1,340 1,537 1,826 2,171 2,330
Gross Profit 827 677 1,017 1,366 1,875
SG&A 504 665 798 918 1,010
Operating Profit 323 12 219 448 865
EBITDA 537 472 648 916 1,354
Tax 84 5 49 96 180
Interest Expenses 10 40 29 26 21
Net Profit 247 22 197 383 719
Net Profit for the company 257 21 185 360 677
EPS (Bt) 1.00 0.08 0.62 1.21 2.27
Statement of Financial Position
Unit: Btmn 2013 2014 2015E 2016E 2017E
Cash & Short-term investments 288 915 551 488 399
Account Receivable 720 386 496 617 734
Inventory 81 141 167 199 213
Total Current Assets 1,089 1,442 1,214 1,304 1,346
Net PP&E 686 962 1,526 1,471 1,394
Total Non-Current Assets 1,210 3,840 4,196 3,934 3,650
Total Assets 2,299 5,282 5,411 5,238 4,997
Short-Term Borrowings 352 250 250 250 250
Account Payable 288 521 619 736 790
Total Current Liabilities 677 1,128 1,297 1,536 1,590
Long-Term Borrowings 47 732 694 584 474
Total Non-Current Liabilities 86 2,404 2,296 1,756 1,215
Total Liabilities 763 3,532 3,594 3,291 2,805
Paid-up Capital 257 266 385 385 385
Capital Surplus 609 800 800 800 800
Retained Earnings 605 630 566 674 876
Total Equity of the Company 1,471 1,694 1,750 1,857 2,059
Total Equity 1,536 1,750 1,817 1,947 2,192
Total Liabilities and Equity 2,299 5,282 5,411 5,238 4,997
Revenue Breakdown 2013 2014 2015E 2016E 2017E
Workpoint TV 215 549 1,786 2,528 3,166
TV Production 1,485 1,164 360 371 382
Event & Concerts 334 399 650 570 587
Others 133 102 47 69 70
Source: SET, AWS Estimated
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CG Report
Corporate Governance Report disclaimer
The disclosure of the survey result of the Thai Institute of Directors
Association (“IOD”) regarding corporate governance is made pursuant
to the policy of the Office of the Securities and Exchange Commission.
The survey of the IOD is based on the information of a company listed
on the Stock Exchange of Thailand and the Market for Alternative
Investment disclosed to the public and able to be accessed by a
general public investor. The result, therefore, is from the perspective of
a third party. It is not an evaluation of operation and is not based on
inside information.
The survey result is as of the date appearing in the Corporate
Governance Report of Thai Listed Companies. As a result, the survey
result may be changed after that date, Asia wealth Securities Company
Limited does not conform nor certify the accuracy of such survey result.
Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2014.
Score Range Number of Logo Description
90 – 100
80 – 89
70 – 79
60 – 69
50 – 59
Below 50
No logo given
Excellent
Very Good
Good
Satisfactory
Pass
N/A
BAFS EGCO IRPC KTB PTTEP SAT SIM TOPBCP GRAMMY IVL MINT PTTGC SC SPALIBTS HANA KBANK PSL SAMART SCB TISCOCPN INTUCH KKP PTT SAMTEL SE-ED TMB
AAV BIGC DELTA HMPRO NBC PJW SAMCO SVI TOGACAP BKI DRT ICC NCH PM SCC TCAP TRCADVANC BLA DTAC KCE NINE PPS SINGER TF TRUEANAN BMCL DTC KSL NKI PR SIS THAI TSTEAOT BROOK EASTW LANNA NMG PRANDA SITHAI THANI TSTHASIMAR CENTEL EE LH NSI PS SNC THCOM TTAASK CFRESH ERW LHBANK OCC PT SNP TIP TTWASP CIMBT GBX LOXLEY OFM QH SPI TIPCO TVOBANPU CK GC LPN PAP RATCH SSF TK UACBAY CNT GFPT MACO PE ROBINS SSI TKT VGIBBL CPF GUNKUL MC PG RS SSSC TNITY VNTBECL CSL HEMRAJ MCOT PHOL S&J STA TNL WACOAL
2S BEAUTY CSS IHL MFEC PPM SKR TBSP TSC ZMICOAF BEC DCC INET MJD PPP SMG TEAM TSCAH BFIT DEMCO IRC MODERN PREB SMK TFD TTCLAHC BH DNA IRCP MONO PRG SMPC TFI TUFAIT BJC EA ITD MOONG PRIN SMT THANA TVDAJ BJCHI ESSO KBS MPG PTG SOLAR THIP TWFPAKP BOL FE KGI MTI QLT SPC THREL UMIAKR BTNC FORTH KKC NC QTC SPCG TIC UPAMANAH BWG FPI KTC NTV RCL SPPT TICON UPFAMARIN CCET GENCO L&E NUSA SABINA SST TIW UPOICAMATA CGD GL LRH NWR SALEE STANLY TKS UTAP CGS GLOBAL LST NYT SCBLIF STEC TLUXE UVAPCO CHOW GLOW MAJOR OGC SCCC STPI TMI UWCAPCS CI GOLD MAKRO OISHI SCG SUC TMT VIHAQUA CKP HOTPOT MATCH PACE SEAFCO SWC TNDT WAVEARIP CM HTC MBK PATO SEAOIL SYMC TPC WHAAS CMR HTECH MBKET PB SFP SYNEX TPCORP WINASIA CSC HYDRO MEGA PDI SIAM SYNTEC TRT WINNERAYUD CSP IFS MFC PICO SIRI TASCO TRU YUASA
Source: Thai Institute of Directors (IOD)
9
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Contact
Branch Address Phone Fax
Head Office 540 Floor 7,14,17 , Mercury Tower, Ploenchit Road, Lumphini,
Pathumwan Bangkok 10330
02-680-5000 02-680-5111
Silom 191 Silom Complex Building,21st Floor Room 2,3-1 Silom Rd.,
Silom, Bangrak, Bangkok, 10500 Thailand
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Asok 159 Sermmitr Tower, 17th FL. Room No.1703, Sukhumvit 21
Road, Klong Toey Nua, Wattana, Bangkok 10110
02-261-1314-21 02-261-1328
Pinklao
7/3 Central Plaza Pinklao Office Building Tower B, 16th Flr.,
Room No.1605-1606 Baromrajachonnanee Road, Arunamarin,
Bangkoknoi, Bangkok 10700
02-884-7333 02-884-7357,
02-884-7367
Chaengwattana
99/99 Moo 2 Central Plaza Chaengwattana Office Tower, 22nd
Flr., Room 2204 Chaengwattana Road, Bang Talad, Pakkred,
Nonthaburi 11120
02-119-2300 02-835-3014
Chaengwattana 2
9/99 Moo 2 Central Plaza Chaengwattana Office Tower, 22nd Flr.,
Room 2203 Chaengwattana Road, Bang Talad, Pakkred,
Nonthaburi 11120
02-119-2388 02-119-2399
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Road, Bangkaew Bangplee, Samutprakarn 10540
02-106-7345 02-105-2070
Rayong 356/18 Sukhumvit Road, Nuen-Phra Sub District, Muang
District, Rayong Province 21000
038-808200 038-807200
Khonkaen 26/9 Srijanmai Road, Tamboonnaimuang, Khon Khaen
40000
043-334-700 043-334-799
Chonburi 55/22 Moo 1, Samed Sub District, Muang District, Chonburi
20000
038-053-858 038-784-090
Chaseongsao 233-233/2 Moo2 1st Flr., Sukprayoon Road, Na Meung Sub-
District, Meung District, Chachoengsao 24000
038-981-587 038-981-591