Price (Bt) 12.90
Target (Bt) 13.10
Set Index 556.47
Earnings flat in 1Q09
Higher revenues with lower margins
GMM Grammy (GRAMMY) reported a flat yoy 1Q09 net profit of Bt106mn.
Growing music, TV and marketing event business boosted the GRAMMY top line. However, the gross margin contracted from 41.9% in 1Q08 to 38.4% due largely to weaker performance from the radio and publishing businesses inline with the industry. The launch of satellite TV services in 2H08 coupled with more advertising and marketing campaigns for digital and TV business added more costs.
Revenue growth driven by music, TV and marketing events
We see continuing growth in total revenues. Increasing music sales are attributed to the
successful of Luk Tung music sales together with 83% yoy growth of digital business (downloads).
Significant growth has resulted from the launch of unlimited music and ringback tone download packages
jointly offer with DTAC (since 3Q08) and AIS (Since 1Q09). Rising popularity of prime-time dramas and
sitcoms has helped boost TV revenues. The total airtime also rose from 2,655 minutes/week in 1Q08 to 2,860
minutes/week including the seasonal programme, The Star 5. The event-marketing unit delivered 92% growth,
thanks to a low base in 1Q08 with fewer marketing activities in honour of HRH Princess Kalaya Niwattana.
The company also enjoys more customers from both the public and private sectors, such as, True Move, Nestle
and Thai Life Insurance.
Improving performance expected in 2Q09
GRAMMY is expected to show improving performance in 2Q09 due to the high season for the ad
industry that benefits TV operations. We will see more large-scale concerts, 12-Year Sek Loso and Beauty on
the Beat Concert. Digital business should perform even better based on more subscribers, reaching 1.1mn
under DTAC and 0.7mn under AIS, in April.
Positive outlook
GRAMMY earnings are projected to decline 4% yoy to Bt632mn (Bt1.19/share) in 2009 due to higher
costs. However, revenues will be driven by the digital business with more services and more mobile
operators. An ad rate increase on prime-time dramas and sitcoms, effective January, with a favourable
utilisation should secure growth of TV performance. The marketing event unit should enjoy resilient demand
from both public and private customers. We also expect to see additional income from more concerts
(including Bird Fancy Fanson Concert) and five movies releases. Note that one movie, Best In Time, was
introduced in 1Q09 producing Bt46mn in box office income and another four will be shown in 2H09.
Downgrade rating to HOLD
We still have a positive view on GRAMMY along with a dividend yield that remains attractive at 7-
8%. However, the share price offers a limited upside to our target price of Bt13.10. We accordingly have
downgraded our rating from BUY to HOLD.
Earnings summary
YearEndDec31 2006 2007 2008 2009F 2010F
Sales (Btmn) 6,068 6,930 7,476 7,765 8,299
EBITDA (Btmn) 1,115 1,470 1,597 1,594 1,720
Normalised earnings (Btmn) 209 502 655 632 690
Earnings (Btmn) 209 502 705 632 690
EPS (Bt) 0.43 1.02 1.44 1.19 1.3
PER (x) 30.3 12.6 9 10.8 9.9
EV/EBITDA (x) 5.8 4.3 4 4.2 3.7
Free cash flow (Btmn) -139 520 486 749 740
CF/share (Bt) 1.3 1.9 2.1 2.2 2.2
BVPS (Bt) 5.9 6.1 6.1 5.7 6.1
P/BV (x) 2.2 2.1 2.1 2.3 2.1
DPS (Bt) 0.4 0.65 1.25 0.95 1.04
Dividend yield (%) 3.10% 5.00% 9.70% 7.40% 8.10%
Net debt/equity (x) 0.04 0.01 0.04 Cash Cash
ROA (%) 3.00% 7.50% 10.40% 9.40% 10.30%
ROE (%) 5.80% 13.80% 19.30% 16.80% 17.20%
Source : Company reports and KELIVE Research estimates.
By Kim Eng Securities (Thailand) Company Limited on May 20, 2009
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