DBSVS Expects VGI’s OOH Advertising to Recover in 2021, Recomm. “BUY” with TP of ฿7.48

DBS Vickers Securities (DBSVS) has carried out an analysis of VGI Public Company Limited (VGI)’s 2021 earnings outlook, expecting the operational performance loss of 21 million baht in 4Q20/21 (ended March 2021), compared to a record high net profit of 713 million baht in 3Q20/21, as this quarter is typically considered as the low season for business and Thailand had a resurgence of Covid-19. 

 

Even though OOH advertising business has shown a slowdown in 4Q20/21, VGI will record an offsetting revenue of 513 million baht from share of profit from investments in KEX (Kerry Express).

 

According to VGI’s 2021-2022 guidance (ended March 2022), VGI estimated revenue should stand out at 3,800-4,000 million baht and net profit margin at 20-25% or accounting to 760-1,000 million baht earnings vs. DBSVS’s previous earnings forecast of 1,179 million baht. 

 

With the Covid-19 impact and intense competition among freight forwarders, DBSVS has trimmed 2021-2021 earnings outlook by 32% to 801 million baht from 1,179 million baht, based on 1) gross profit margin would drop to 45% from 49% and 2) share of profit from joint ventures and subsidiaries would decline to 157 million baht from 284 million baht due to Covid-19’s effects on the operation of MACO in Malaysia and Indonesia, together with  intense competition among Thai logistics providers. Overall, VGI’s performance is on a recovery path compared YoY, earnings in 2021-2022 are expected to reach 87 million baht and 600 million baht, respectively. 

 

For the joint venture Rabbit Cash, DBSVS expected the company to record a loss in the first three years, but has a bright long-term prospect. 

 

DBSVS has given a “BUY” recommendation on VGI with a new target price of ฿7.48/share in line with 2021-2022 earnings forecast revision, stating OOH advertising and digital service business to recover align with Thailand’s economy and the expansion of BTS.