RS Is Gaining Momentum, Analyst Recomm. “BUY” on Predicted New High Revenue in 2021
RS is expected to maintain its current pace of growth and will continue to record new high revenue in 2021-2022F with EPS CAGR of 37%.
RS Public Company Limited (RS) is expected to maintain its current pace of growth. KTBST Securities (KTBST) forecasted RS’s revenue for 2021 at 5.7 billion baht, a significant increase of 51% YoY. Commerce is projected to increase 68% YoY to 4.0 billion baht, followed by media & entertainment of 22% YoY to 1.7 billion baht.
Commerce’s momentum is gaining stronger. RS has a plan to launch new products from 2Q21E while experiencing a limited impact from the new wave of COVID-19 outbreak. However, 7-Eleven’s newest distribution network looks to be faltering, as the company only launched its first product, “Camu C,” in April. RS anticipates an increase in sales through 7-Eleven in 2H21E.
Hemp products awaiting FDA approval. RS aims to launch 7-8 SKUs of hemp products with an estimated revenue of 500-700 million baht. The company anticipates launching its first hemp-infused instant coffee product in 2Q21E, or by 3Q21E at the latest. Revenue from hemp goods was expected to exceed 467 million baht, according to KTBST. However, KTBST has not yet factored it into its prediction due to the significant downside risk associated with a late FDA approval, which might jeopardize the company’s product launch timeline.
Equity income from Chase to exceed the forecast. RS said Chase’s equity income may exceed the company’s forecast of 77.00 million baht after the company recorded nearly 10.00 million baht in March. As for listing, RS will conduct a filing in 2Q22E, which should allow trading in early November 2022.
M&A deals to be struck in 2H21E. The company has studied 1-2 M&A deals on production and innovation to support the commerce business. RS has earmarked a budget of 300-600 million baht/deal.
Overall, KTBST maintained 2021E net profit forecast at 803 million baht, which indicates a strong growth of 52% YoY. The forecast was based on the assumptions that 1) total revenue will grow 32% with i) the commerce business to surge 40% YoY on the back of new products, revenue from other digital TV channels and its application CoolAnything, ii) the media business to rise further on higher ad revenue and copyright sales to OTT platform, and iii) the music & other business will see improvement;
And 2) blended gross profit margin will widen in expectation of a strong gross profit margin from the commerce/media businesses, as well as benefit from a full-year exemption of payment to MUX fee.
In conclusion, KTBST believes RS is gaining momentum and will continue to record new high revenue in 2021-2022F with EPS CAGR of 37%. Since RS also benefits from M&A and hemp products, KTBST has given a “BUY” recommendation with a target price of 31.00 baht per share.