VGI: 3QFY17/18 profit jumps 44% y-y, beats forecast by 4.4% February 14, 2018
3QFY17/18 profit jumps 44.0% y‐y, beats forecast by 4.4%: VGI trumped forecasts with a 44.0% y‐y jump in 3QFY17/18profit on revenue beat. The quarterly profit came in at Bt181mn, which was Bt7mn higher than our forecast of Bt174mn as revenue topped estimates by 3.1% with a 26.8% y‐y rise for the period. Even though digital advertising felt the effects of a one‐month moratorium of digital ad services during the royal cremation ceremonies for the late monarch in Oct 2018, the impact could be offset by solid growth at office building and other media business, MACO, and transit media business. In this period, revenue from office building and other media segment surged 47.3% y‐y on the back of ad rate increases, management fees for Wi‐fi services on BTS stations and expansion of the office building media network following the addition of 10 new office buildings to its portfolio, bringing the total to 172. Revenue from MACO soared 46.8% y‐y after the consolidation of COMASS and on higher utilization of 21 LED digital billboards following static‐todigital conversion. Transit media revenue leapt 27.7% y‐y thanks to ad rate increases for static media and a rise in number of stations under its cross‐media ‘station sponsorship’ campaign to nine, which generated combined revenues of around Bt84mn. On the other hand, revenue from digital services business dropped 21.7% y‐y as a result of lower system and project management fees from Bangkok Smartcard System Co. Costs inched up 16.7% y‐y along with business expansion but the cost‐to‐revenue ratio however drifted lower to 39.4% in this period from 42.8% in the same year‐ago period. SG&A expenses ticked down 2.4% y‐y on tight expense controls. In this period, VGI realized a loss of around Bt55mn from its affiliates due chiefly to bigger losses from Rabbit LinePay and amortization of purchase price allocation (PPA) related to the acquisition of Demo Power.
Upbeat outlook for 4QFY17/18, ‘ACCUMULATE’ rating unchanged with FY18/19 target price of Bt6.80/share: We remain upbeat on the profit outlook for VGI in 4QFY17/18 on view that digital advertising will get back to normal after the end of the royal cremation ceremonies for the late monarch and ad expenditures will pick up amid signs of improving economic growth. Our forecast also shows the positive momentum will continue well into FY18/19. We estimate its FY18/19 profit will rise 22.9% y‐y to Bt1,012mn. At current prices, we leave our ‘ACCUMULATE’ rating unchanged for VGI with a FY18/19 target price of Bt6.80/share. Following results announcement, VGI declared an interim dividend of Bt0.036/share from its 1HFY17/18 operations. The stock will trade XD on Feb 22, and the dividend is scheduled to be paid on Mar 9, 2018.