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THAILAND EQUITY RESEARCH
Page | 1 | PHILLIP SECURITIES (THAILAND)
RS
MPC to be main revenue earner ahead
THAILAND | SET | MEDIA | COMPANY UPDATE BLOOMBERG RS TB l REUTERS RS.BK
4QFY17 profit turnaround helped by stellar showing from H&B business RS swung back to a net profit of Bt110mn in 4QFY17 from a net loss of Bt63mn in 4QFY16, helped largely by a stellar showing from H&B business and a lesser impact from the royal cremation ceremony of the late monarch than what it saw during the mourning period a year ago in media business. For the quarter, total revenue surged 64.5% y-y to Bt896mn driven mainly by H&B business. Revenue from H&B business increased eleven-fold to Bt466mn from a mere Bt42mn a year while revenue from music business rose 2.9% y-y and revenue from media business including digital and satellite TV channels and radio station jumped 7.3% y-y. Only event business or showbiz saw revenue drop by 10.6% y-y as a result of a reduction in outside customer numbers following a shift in focus to support RS business. Total costs inched up 19.5% y-y along with revenue growth in H&B business but the pace of increase was less than that of revenue as H&B business had high gross margins. SG&A expenses ticked down 18.6% y-y following changes in accounting method for recognition of selling expenses. Other income tumbled 90.8% y-y, reflecting an exceptional income from reversal of some provisions for annual digital TV license and USO fund fees a year earlier. For the whole of FY17, RS also turned in a net profit of Bt333mn, a turnaround from a net loss of Bt102mn in FY16. H&B business remained the biggest contributor to the profit turnaround. Full-year total revenue jumped 12.1% y-y to Bt3,502mn, riding a wave of strong growth in H&B business. Revenue from H&B business swelled 509.5% y-y to Bt1,389mn from a mere Bt228mn. However, RS skipped its dividend for FY17 as some of its retained earnings had been appropriated for treasury share reserve. Focus still on H&B, plan to add H&L product line and launch Lifestar BIZ H&B business looks set to continue its run of meteoric growth well into FY18 as RS plan to (i) nearly triple the SKU count for both its own and partners’ products to 70-75 from 29 at end-FY17, (ii) focus more on outbound sales, which represented only 15% of H&B revenue in FY17 by effectively managing its existing database of around 700,000 customers which is expected to hit 1mn this year to increase repeat sales while inbound sales are expected to keep growing along with new customer additions, (iii) boost the share of online sales to 10% from 7% due to lower costs, (iv) increase retail sales through merchandizing strategy, (v) launch ‘Lifestar BIZ’ direct sales for SOM products - Starting in mid-Jan 2018, the Lifestar BIZ targets 10,000 people applying to become its salesperson this year, and (vi) look for opportunities to expand its H&B business presence into neighboring countries. Currently H&B business has the following three brands in its portfolio: (i) skincare brand Magique, (ii) haircare brand Revive, and (iii) food supplement brand SOM. H&B business aside, RS also plans to add a new Home & Lifestyle (H&L) product line business to its portfolio following a strong response from shoppers after testing the market late last year. Note that RS collectively calls H&B, H&L and Lifestar BIZ as Multiple Platform Commerce (MPC) business. Given that revenue from MPC business will outstrip that of media business, there is a possibility that RS may be moved to the commerce from the media sector. Plan to transform media business to support MPC while music and event businesses likely to play lesser role RS plans to transform its media business, notably Channel 8, a digital TV channel number 27 and satellite TV channel to support its MPC business, and focus on sales of high-priced primetime ad slots after fierce competition prompts it to give discounts on ad rates. A portion of primetime ad slots will be allocated to run commercial spots for H&L products while non-primetime slots will be allocated to promote H&B and SOM products. For this reason, ad revenue is likely to grow less than previously thought this year but it could be offset by additional revenue from H&L business, which is likely to be more than revenue from ads it runs for H&L products. For radio business, RS has streamed its radio station online in a bid to broaden its audience base and increase ad sales. In music business, costs have dropped after business model overhaul. YouTube and music streaming would become a core pillar of revenue for music business. The event business or showbiz will maintain its focus on supporting the media business, especially Channel 8 and Sabaidee TV. The above plans would reduce the role of music and event businesses in driving revenue growth for RS ahead.
Ref. No.: CO2018_0245
Closing Price(Bt) 29.75
Target Price(Bt) 37.00 (+26.89%)
COMPANY DATA
O/S Shares (mn) : 1,010
Market Cap. (Btmn) :
Market Cap. (USDmn) :
52‐WK Hi/Lo (Bt) : 35.75/8.55
3M Average Daily T/O (mn) : 7.21
Par Value (Bt) : 1.00
MAJOR SHAREHOLDERS (%)
1. Mr. Surachai Chetchotisak 32.0
2. Mr. Sorat Vanitvarakit 11.4
2. BBL 5.8
PRICE PERFORMANCE (%)
1MTH 3MTH 1YR
ABS ‐6% 22% 232%
REL TO SET INDEX ‐6% 15% 182%
PRICE VS SET INDEX
Source: Bloomberg, PSR
KEY FINANCIALS
FYE Dec FY16 FY17 FY18E FY19E
Sales(Btmn) 3,125 3,502 5,878 7,905
Net Profit(Btmn) ‐102 333 1,105 1,576
EPS (Bt) ‐0.10 0.33 0.89 1.26
P/E (X) n.m. 90.2 33.4 23.6
BVPS (Bt) 1.05 1.39 4.71 5.47
P/B (X) 28.3 21.4 6.3 5.4
DPS (Bt) 0.00 0.00 0.75 1.01
Dividend Yield (%) 0.0 0.0 2.5 3.4
ROE (%) ‐7.29 21.36 29.08 37.02
Source: Company, PSR Est.
**Multiples and yields are based on latest closing price
VALUATION METHOD
DCF (WACC: 9.09%; terminal g: 4.0%)
Siam Tiyanont
Securities Investment Analyst #17970
Tel: 66 2 635 1700 # 483
14 March 2018
30,052
961
07 March 2018
Buy (Maintain)
0
10
20
30
40
Mar‐15 Mar‐16 Mar‐17 Mar‐18
RS TB EQUITY SETI (rebased)
Page | 2 | PHILLIP SECURITIES (THAILAND)
RS COMPANY UPDATE Treasury share resale underway RS board of late gave a nod to a plan to sell 43.27mn treasury shares it earlier bought back at an average cost of Bt10.752/share back to the open market from Mar 8, 2018 to May 30, 2019. It is expected to receive more than Bt1,250mn in proceeds from the share resale based on current market prices of around Bt30/share. Not only could the move bring down interest expenses as the proceeds would be used to pay back loans but it should also enable RS to hand out a larger dividend check this year as the appropriated treasury share reserve of Bt465mn may be reversed to unappropriated retained earnings if the above treasury shares could be sold back to the market. FY18 profit outlook upgraded to Bt1,105mn We upgrade our FY18 net profit outlook for RS to Bt1,105mn from a previous estimate of Bt919mn. The profit upgrade comes after an upward revision to our FY18 revenue estimate to Bt5,878mn to reflect the brighter-than-expected outlook thanks to the focus on fast-growing, high-margin MPC business, which has lower PR costs than competitors by taking advantage of its own media platforms to promote its products, and the focus of ad sales on high-priced primetime slots at Channel 8. In our view, MPC business looks set to be the main revenue earner for RS this year on expectations that it will contribute up to 61% of total revenue while media business makes up 33% and the rest from music and showbiz businesses. FY18 target price lifted to Bt37/share, ‘BUY’ rating reaffirmed Following the above profit upgrade, we lift our FY18 target price for RS to Bt37/share. The target is DCF-based and on a fully diluted basis including the effect of the above treasury share resale. We also reaffirm a ‘BUY’ rating on RS shares in light of its continued strong turnaround story and some valuation upside from current trading levels.
Page | 3 | PHILLIP SECURITIES (THAILAND)
RS COMPANY UPDATE
Page | 4 | PHILLIP SECURITIES (THAILAND)
RS COMPANY UPDATE
Declared
A AI AIE AIRA AJ ALUCON AMATAV AOT APCO AQUA
ARROW ASIA ASK AU BCH BJC BJCHI BLAND BR BROCK
BRR CEN CGH CHEWA CHG CHOTI CHOW CIG COL COM7
CPALL CPF CPR CSC EKH EPCO FC FER FPI FSMART
GEL GFPT GGC GIFT GJS GLOBAL GOLD GPSC GREEN GSTEL
GUNKUL HARN IFS ILINK INET IRC J JMART JMT JUBILE
JUTHA KASET KBS KCAR KTECH KWC KYE L&E LEE LIT
LVT MAKRO MATCH MATI MBAX MC MFEC MIDA MILL ML
MTLS NBC NCL NEP NINE NMG NNCL NTV NUSA NWR
OGC PACE PAF PAP PATO PCSGH PIMO PK PL PLANB
POST PRINC PRO PSTC PYLON QTC ROH ROJNA RWI SANKO
SAUCE SC SCCC SCN SEAOIL SE‐ED SENA SIRI SMART SPACK
SPPT SPRC SR SRICHA SST STA SUPER SUSCO SWC SYMC
TAKUNI TBSP TFI THE TICON TIP TKN TLUXE TMILL TMT
TNP TPA TRUE TSE TTI TU TVD TVO TVT TWPC
U UPA UREKA UWC VGI VIBHA VIH VNT WAVE WHA
WICE WIIK
Certified
ADVANC AKP AMANAH AP ASP AYUD BAFS BANPU BAY BBL
BCP BKI BLA BROOK BTS BWG CENTEL CFRESH CIMBT CM
CNS CPI CPN CSL DCC DEMCO DIMET DRT DTAC DTC
EASTW ECL EGCO FE FNS FSS GBX GCAP GLOW HANA
HMPRO HTC ICC IFEC INTUCH IRPC IVL K KBANK KCE
KGI KKP KSL KTB KTC LANNA LHBANK LHK LPN MBK
MBKET MCOT MFC MINT MONO MOONG MSC MTI NKI NSI
OCC OCEAN PB PDI PE PG PHOL PLAT PM PPP
PPS PRANDA PREB PRG PSH PSL PT PTG PTT PTTEP
PTTGC Q‐CON QH QLT RATCH RML ROBINS S & J SABINA SAT
SCB SCC SCG SGP SINGER SIS SITHAI SMIT SMPC SNC
SNP SORKON SPC SPI SSF SSI SSSC SVI SYNTEC TAE
TCAP TCMC TFG TGCI THANI THCOM THRE THREL TIPCO TISCO
TKT TMB TMD TNITY TNL TOG TOP TPCORP TRU TSC
TSTH TTCL TVI UOBKH WACOAL
Non‐participation
2S AAV ABICO ACAP ACC ADAM AEC AEONTS AF AFC
AGE AH AHC AIT AJA AKR ALLA ALT AMA AMARIN
AMATA AMC ANAN APCS APEX APURE AQ ARIP AS ASAP
ASEFA ASIAN ASIMAR ASN ATP30 AUCT BA BAT‐3K BCPG BDMS
BEAUTY BEC BEM BFIT BGRIM BGT BH BIG BIZ BKD
BLISS BM BOL BPP BSBM BSM BTC BTNC BTW BUI
CBG CCET CCP CGD CHARAN CHO CHUO CI CITY CK
CKP CMO CMR CNT COLOR COMAN CPH CPL CRANE CRD
CSP CSR CSS CTW CWT D DCON DCORP DELTA DIGI
DNA DTCI EA EARTH EASON ECF EE EFORL EIC EMC
EPG ERW ESSO ESTAR ETE EVER F&D FANCY FMT FN
FOCUS FORTH FTE FVC GC GENCO GL GLAND GRAMMY GRAND
GTB GYT HFT HOTPOT HPT HTECH HYDRO ICHI ICN IEC
IHL III INGRS INOX INSURE IRCP IT ITD ITEL JAS
JCT JSP JTS JWD KAMART KC KCM KDH KIAT KKC
KOOL KTIS KWG LALIN LDC LH LOXLEY LPH LRH LST
LTX M MACO MAJOR MALEE MANRIN MAX M‐CHAI MCS MDX
MEGA METCO MGT MJD MK MM MODERN MPG MPIC NC
NCH NDR NETBAY NEW NEWS NFC NOBLE NOK NPK NPP
NVD NYT OHTL OISHI ORI OTO PAE PDG PERM PF
PICO PJW PLANET PLE PMTA POLAR POMPUI PPM PRAKIT PRECHA
PRIN PRM PTL RAM RCI RCL RICH RICHY RJH ROCK
RP RPC RPH RS S S11 SAFARI SALEE SAM SAMART
SAMCO SAMTEL SAPPE SAWAD SAWANG SCI SCP SDC SE SEAFCO
SELIC SF SFP SGF SHANG SIAM SIMAT SKN SKR SKY
SLP SMK SMM SMT SOLAR SPA SPALI SPCG SPG SPORT
SPVI SQ SSC SSP STANLY STAR STEC STHAI STPI SUC
SUTHA SVH SVOA SYNEX T TACC TAPAC TASCO TC TCB
TCC TCCC TCJ TCOAT TEAM TFD TFMAMA TGPRO TH THAI
THANA THIP THL TIC TIW TK TKS TM TMC TMI
TMW TNDT TNH TNPC TNR TOA TOPP TPAC TPBI TPCH
TPIPL TPIPP TPOLY TPP TR TRC TRITN TRT TRUBB TSF
TSI TSR TSTE TTA TTL TTTM TTW TUCC TWP TWZ
TYCN UAC UBIS UEC UKEM UMI UMS UNIQ UP UPF
UPOIC UT UTP UV UVAN VARO VI VNG VPO VTE
WG WHAUP WIN WINNER WORK WORLD WP WPH WR XO
YCI YNP YUASA ZIGA ZMICO
Companies participating in Thailand's Private Sector Collective Action Coalition Against
Corruption programme (Thai CAC) under Thai Institute of Directors (as of July 31, 2017)
PHILLIP SECURITIESS (THAILAND) | 5 | P a g e
RS COMPANY UPDATE
The SEC ha s a pol i cy to promote l i s ted companie s and i nte rmedia ri e s , i .e . s ecuri ti e s companies , a s s e t management companies , deri va ti ve bus ines s companie s
(“inte rmedia ri e s ”) to es ta bl i s h anti ‐corrupti on measures a s pa rt of the i r bus ines s opera ti on. The SEC ha s s upported Tha ipa t Ins ti tute i n deve loping the Anti ‐corruption
Progre s s Indi ca tor of l i s ted companies and i nte rmedia ri e s . The Indi ca tor compri s es fi ve l e ve l s : Leve l 1: Commi tted, Leve l 2: Decla red, Leve l 3: Es ta bl i s hed,
Leve l 4: Certi fi ed, and Leve l 5: Extended.
The SEC conti nues to deve lop bus i nes s s us ta ina bi l i ty among l i s ted companies and i nte rmedi a ri es wi th a focus on anti ‐corruption by s upporting them to jo in Tha i l a nd’s
Pri va te Sector Col l e cti ve Action Coa l i ti on Aga ins t Corrupti on (CAC) and to di s clos e the i r corpora te gove rnance progre s s on http://www.cgtha i l a nd.org.
Levels of Commitment
Companies participating in Thailand's Private Sector Collective Action Coalition Against Corruption
programme (Thai CAC) under Thai Institute of Directors (as of July 31, 2017)
PHILLIP SECURITIESS (THAILAND) | 6 | P a g e
RS COMPANY UPDATE
Industry Group Name Sector Name Sector Index
Agro & Food Industry[AGRO] Agribusiness AGRI
Food & Beverage FOOD
Consumer Products[CONSUMP] Fashion FASHION
Home & Office Products HOME
Personal Products & Pharmaceuticals PERSON
Financials [FINCIAL] Banking BANK
Finance & Securities FIN
Insurance INSUR
Industrials [INDUS] Automotive AUTO
Industrial Materials & Machinery IMM
Packaging PKG
Paper & Printing Materials PAPER
Petrochemicals & Chemicals PETRO
Steel STEEL
Property & Construction[PROPCON] Construction Materials CONMAT
Construction Services CONS
Property Development PROP
Property Fund & REITs PF&REIT
Resources [RESOURC] Energy & Util ities ENERG
Mining MINE
Services [SERVICE] Commerce COMM
Media & Publishing MEDIA
Health Care Services HELTH
Tourism & Leisure TOURISM
Professional Services PROF
Transportation & Logistics TRANS
Technology [TECH] Electronic Components ETRON
Information & Communication Technology ICT
PSR Rating SystemCapital Gain Recommendation
> 15% BUY
> 5% ‐ 15% ACCUMULATE / TRADING BUY
> 0% ‐ 5% NEUTRAL
0 <= SELL
Remarks
We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors l ike (but
not l imited to) a stock's risk reward profi le, market sentiment, recent rate of share price appreciation, presence or absence of
stock price catalysts, and speculative undertones surrounding the stock, before making our final recommendation
Contact Information of Hong Kong Representatives
Research
Benny WANG
Dealing Director
(852) 2277 6720
ZHANG Jing
Research Analyst
Transportation and Automobiles
(86) 21 51699400-103
John WONG
Research Analyst
HK & Mainland Properties, Hotels &
Entertainment
(852) 2277 6527
Sales
FAN Guohe
Research Analyst
Pharmaceutical, Health & Personal Care, TMT
(86) 21 51699400-110
WANG Yannan
Research Analyst
New Energy
(86) 21 51699400-107
Aric AU Matthew WONG
Manager, Corporate & Institutional Sales Manager, International Sales
(852) 2277 6783 (852) 2277 6678
[email protected] [email protected]
Yoshikazu SHIKITA
Manager, International Sales
(Japan Team)
(852) 2277 6624
PHILLIP RESEARCH STOCK SELECTION SYSTEMS
Total Return Recommendation Rating Remarks
> +20% Buy 1 >20% upside from the current price
+5% to +20% Accumulate 2 +5% to +20% upside from the current price
-5% to +5% Neutral 3 Trade within +/- 5% from the current price
-5% to -20% Reduce 4 -5% to -20% downside from the current price
< -20% Sell 5 -20% downside from the current price
We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like (but not limited to) a stock’s risk reward profile, market sentiment, recent rate of share price appreciation, presence or absence of stock price catalysts, and speculative undertones surrounding the stock, before making our final recommendation
GENERAL DISCLAIMER
This publication is distributed in Hong Kong by Phillip Securities (Hong Kong) Limited (“PSHK”), which is licensed in Hong Kong by the Securities and Futures Commission for regulated activities, including Type 4 regulated activity (advising on securities). This publication was originally prepared by analysts from our overseas affiliates. The information contained herein is based on sources that PSHK and its affiliates believe to be accurate and any analysis, forecasts, projections, expectations and opinions contained in this publication are based on such information and are expressions of belief only. This material is prepared for general circulation to clients and is not intended to provide tailored investment advice and does not take into account the individual financial situation and objectives of any specific
person who may receive this report. Investors should seek financial advice regarding the appropriateness of any investments or securities discussed or recommended in this report. This report is not (and should not be construed as) a solicitation to act as securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on such business in that jurisdiction. This research report may not be redistributed, retransmitted or disclosed, in whole or in part or and any form or manner, without the express written consent of PSHK. Please direct any enquiries to [email protected].
Investment involves risks. For details of product risks, please view the Risk Disclosures Statement on http://www.phiIlip.com.hk.
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