In this briefing:
- PLANB: Solid Outlook for Music Marketing Business Under BNK48 Office
- Titan Co Ltd (TTAN IN)
- Telstra Dividend: Does the 22cps Dividend (7% Yield) Hold? We Think It Does.
- SCMA (SCMA IJ) – Biting the Digital Bullet – On the Ground in J-Town
- China Tower: Changing Our View to Positive. Low Cost Expansion Should Generate Better Returns
1. PLANB: Solid Outlook for Music Marketing Business Under BNK48 Office
We maintain Plan B Media (PLANB TB) with a BUY rating, and the new target price of Bt8.30 derived from 1.5xPEG’2019E, which is the average of Thailand’s consumer discretionary sector or equivalent to 32xPE’19E
The story:
- Revising up net profit in 2018-20E by 2-11% mainly from BNK office
- Music and sports marketing drive earnings momentum north
- Plenty of opportunities to monetize underutilized capacity
Risks: Obstacles for renewing concession contracts with state-owned enterprises along with falling consumer spending and a share-price dilution effect on the back of then generally mandated raise in capital.
2. Titan Co Ltd (TTAN IN)
Titan Company Limited manufactures and sells watches, jewellery, eyewear, and other accessories and products in India and internationally. The company operates through four segments: Watches, Jewellery, Eyewear, and others. It is one of the few companies operating in organised jewellery retail industry of India. We visit stores & markets in Kochi (Kerela) and Chennai (Tamil Nadu), the biggest consumption markets to understand structural changes that have taken place in the industry, with an objective to tweak our revenue and margin estimates. We believe consensus might be underestimating growth from the jewellery segment which is the largest contributor with 81.60% of Sales as of FY2018. Our revenue estimates for FY19 and FY20 are 5.8% & 2.98% higher than consensus, primarily based on higher than expected market share gains from unorganised players. Our EBITDA margins for FY 19 & FY20 are 1% & 1.30% higher than consensus estimates primarily based on product mix which is in favour of studded jewellery and operating leverage as sales across stores pick up. Our EPS for FY19 & FY20 is estimated at INR 18.60 and INR 24.26 per share which is higher than consensus by INR 2.47 and 4.05 per share for FY 19 and FY 20. Based on an average forward multiple of 49x we arrive at a target price of INR 1187, representing a 30% potential return from current market price.
3. Telstra Dividend: Does the 22cps Dividend (7% Yield) Hold? We Think It Does.
Telstra’s (TLS AU) share price continues to drift downwards as more questions are asked about the dividend outlook. Optus has backed up its new mobile marketing campaign with big increases in data allowances across MBB (mobile broadband) price points. Reports suggest TPG (TPM AU) is still talking up ‘disruptive’ mobile data pricing despite its lack of network coverage and capacity. The ACCC (competition commission) is due to make a draft decision on the merger with VHA tomorrow (13 December) and it is known to favor a disruptive 4th MNO. We expect the merger to proceed.
4. SCMA (SCMA IJ) – Biting the Digital Bullet – On the Ground in J-Town
The conclusion from a recent meeting with the management of Surya Citra Media Pt Tbk (SCMA IJ) in Jakarta was that the company is ready to grasp the nettle of moving a significant focus towards the digital space. That said, it is clear that Free-to-Air business is still very much alive and kicking and will be the core driver for some time to come.
Media Partners Asia suggests that the advertising revenues for the Free-to-Air TV industry in Indonesia can grow +5.6% CAGR between 2017-2023.
Internet companies are driving growth at the margin but also make-up 2/3rds of the 15% of total spend on digital advertising, which suggests only 5% lost from TV.
Surya Citra Media Pt Tbk (SCMA IJ) is on the cusp of a significant move into the digital advertising and content space through Vidio.com, Kapanlagi.com, as well as its payments gateway Dana.
The company will also enter a new advertising medium of outdoor billboards, where it will seek to consolidate the industry through acquisitions, with the aim of controlling 50% of this market.
Surya Citra Media Pt Tbk (SCMA IJ) remains the best media proxy for advertising in Indonesia. It has seen its two main Free-to-Air stations SCTV and Indosiar command number 1 & 2 audience share positions over the last two months, giving an overall prime-time audience share YTD of 35%. The company estimates that the core business can probably achieve growth of +10% over the next two years. The real kicker to growth for the company will come from its significant move into the digital and content space through a series of acquisitions, mainly from its parent Elang Mahkota Teknologi Tbk (EMTK IJ). These transactions are will be done at arm’s length so as to avoid any corporate governance concerns. According to CapIQ consensus, the company is trading on 16.7x FY19E PER and 15.1x FY20E PER, with forecast EPS growth of 8.6% and 10.6% for FY19E and FY20E respectively. The company also has a dividend yield of 3.9% for FY19E and generates an ROE of 32%.
5. China Tower: Changing Our View to Positive. Low Cost Expansion Should Generate Better Returns
At the time of the IPO we were quite negative on China Tower (788 HK) prospects. However, in recent calls and meetings our view has changed and become more constructive. Chris Hoare now believes that China Tower is managing to generate co-location growth outside the Master Services Agreement (MSA) and at a much lower level of capital intensity (perhaps up to 50%) than indicated in the IPO. Management has also proven to be more open to shareholders than expected and with lower capex, higher FCF generation we upgrade to a BUY with a HK$1.60 target price. The stock has started to move as the market has begun to understand the more positive outlook. It will be interesting to see if China Tower is allowed to retain these benefits long term.
Summary China Tower forecasts:
