Initiate Coverage : WORK · 2015-04-23 · 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

Initiate Coverage : WORK 23 April 2015

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Please see disclaimer on last page

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%


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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.


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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


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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.


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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.


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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


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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)

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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

02-630-3500 02-630-3530-1

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

Mega Bangna 39 Moo6 Megabangna, 1st Flr., Room 1632/7 Bangna-Trad

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

Documents

Initiate Coverage : WORK · 2015-04-23 · 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