Thailand's Media Sector: MCOT CEO resigns

(Thai Press Reports Via Thomson Dialog NewsEdge) Section: Stocks - The CEO of MCOT Mingkwan Sangsuwan and the entire board of directors resigned yesterday. The resignations are effective today (27 Sep). Note that the chairman and CEO have strong relationships with ousted PM Thaksin Shinawatra, and MCOT (Ch 9) was the only TV station in the country that broadcasted Thaksin's declaration of a state emergency following the coup d'etat on 19 Sep.

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The resignations are very negative to MCOT's profitability. As a state enterprise, MCOT is a typical bureaucratic entity. Ex-CEO Mingkwan was the one that turned around the TV station. Although the CEO and top management were professionals, most of middle management and staff still have a bureaucratic operating style. MCOT is out of our coverage, but we had been generally negative towards MCOT given (i) low earnings quality, as the bulk of its revenue and earnings are revenue sharing income from BEC and UBC, (ii) bureaucratic style, and (iii) high valuations (18x 2006 PE based on consensus earnings).

Investors were recommended SWITCH to BEC, which offers better value. First, BEC has quality management that is very keen on entertainment programs, which are more profitable than news and documentary programs. Second, BEC will be the prime beneficiary of ITV losing its court case. Third, BEC has superior earnings quality, as all its revenue and profit are generated from its own operations. BEC offers 24% upside potential to out target price of Bt21.0, based on 20x 2007 PE and 5.0% 2007 dividend yield. A BUY call is reiterated for BEC, which is top pick in the sector.

(DBS Vickers Securities (Thailand): 28 September 2006)

Copyright 2006 Thai Press Reports


Related Tags: earnings, learn, quality, Thailand, revenue, thailand

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