Analysts predict brief windfall

Analysts predict brief windfall

Although the cancellation of digital TV licences will help lower operators' costs, the benefits will be short-lived because the outlook for the media sector remains bleak in the long run, with advertisers continuing to shun traditional channels for digital platforms, securities analysts say.

KGI analyst Piyathida Sonthisombat said the media sector's earnings for the second half are expected to improve because of lower costs after some digital TV operators return their licences and exit the field.

"We maintain our neutral rating on the media sector, particularly for TV operators, in the wake of the revenue slowdown in the first quarter 2019 and weak outlook in the long term," Ms Piyathida said. "We're concerned that revenue growth during the industry downturn that will dilute the upside gains from use of Section 44."

Her comments came after seven of the 22 digital TV operators submitted proposals to return their licences, as allowed by Section 44. The seven broadcasters will be given compensation sums from which the amount of assistance they got from the must-carry rule and broadcasting network rental fee subsidy, as well as their annual net profits, will be subtracted.

The channels that will exit are Channel 3 Family 1, Channel 3 SD 28, Spring News 19, Spring 26 (formerly Now 26), MCOT 14, Voice TV 21 and Bright TV 20.

The brokerage house expects TV operators under its coverage to report wider-than-expected losses for the first quarter as competition intensifies in the industry, taking a toll on future earnings.

Digital TV operators earlier predicted that the combined loss would amount to 471 million baht for the January-to-March quarter.

Workpoint Entertainment (WORK) is KGI's top pick in the media sector because of its cheaper valuation compared with rivals, while Mono Technology Plc (MONO), operator of Mono Channel 29, is expected to remain mired in losses this year.

Regarding the planned 700MHz licence sale in exchange for the 900MHz licence payment extension under Section 44, Asia Plus Securities estimates that prices of the new spectrum licences will be capped at 27 billion baht for the 15MHz slot.

Under Section 44, the three big telecom operators -- Advanced Info Service Plc (ADVANC), True Move H Universal Communication (TUC) and Total Access Communication Plc (DTAC) -- will be allowed to extend their 900MHz licence payment terms for another five years only if they agree to buy 700MHz licences.

ADVANC and its parent InTouch Holdings (INTUCH) are ASP's top picks in the telecommunication sector.

Finansia Syrus Securities, however, said in a research note that ADVANC has limited upside because the 700MHz spectrum's allocation criteria remain unclear, though the payment extension is positive for the company's cash flow.

The purchase of the new spectrum will increase financial burden and costs, the note said. ADVANC, in fact, does not need new spectrum for the next 1-2 years, Finansia said.

Tough competition will pressure revenue growth, so the broker is retaining a hold rating on ADVANC.

Yesterday on the SET, BEC closed at 8.75 baht, up 20 satang, in trade worth 467 million baht; MCOT closed at 10.60 baht, down 20 satang, in trade worth 7.63 million baht; and NEWS closed at 0.01 baht, unchanged, in trade worth 382,000 baht.


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