Analysts Recommend VGI in Unison, Giving a “BUY” Rating with TP as High as ฿10.20

After the announcement of VGI Global Media Public Company Limited (VGI), stating its intention in acquiring 18.60% of Plan B Media Public Company Limited (PLANB) by today, various security companies have made an analysis on VGI, and all of them have “buy” recommendation.

 

Maybank Kim Eng states that it has a positive view on VGI’s plan to buy 18.6% of PLANB’s shares, due to (1) despite the net dividend receive shall affect our net profit forecast by 2-5% in 1-2 years, (2) this action will enhance bargaining power to out of home media operators, which is outperforming industry currently. This will benefit the long-term pricing for VGI, MACO and PLANB and (3) VGI remains financially strong for this transaction. Maybank reiterates its BUY call, and revised a 12-month TP-DCF to ฿10.20/share.

 

Regarding the matter of buying from existing shareholders and PP shares, the Board of Directors has approved the purchase of 721.8 million shares or 18.6% in PLANB, so that VGI becomes the second largest shareholder.

The acquisition of shares from four existing shareholders totaled 368.8 million shares, at a price of ฿6.40/share, the remaining 49% is the purchase of PP shares that PLANB has previously approved for the shareholders at the same price. VGI will spend a total of THB 4.6 billion, THB 2.9 billion in cash and THB 1.7 billion from borrowing. The deal is expected to be completed in March. In addition, VGI will send one director to the board of PLANB.

 

Benefits from PLANB shares will be recorded via receiving dividends. PLANB pays dividend once a year in May (VGI’s Q1), which recently announced a dividend payout of ฿0.091/share, XD on 9 May. This time, VGI will receive dividend from 368.8 million shares purchased from existing shareholders only, around THB 33.6 million.

This will benefit Maybank’s earnings forecasts for 2019/20 by about 2% and will increase to 4.8% or THB 90 million in 2020/21 from the recognition of all dividends from 721.8m shares it purchased.

 

In addition, Maybank has a positive view on this deal. Even though the net dividend received from the interest paid for this purchase after interest expenses were about THB 40 million +/- pa, the cooperation of Thailand’s top operators of out of home media with combined revenue of THB 10 billion should increase their bargaining power well.

With the largest media networks coverage in ASEAN, VGI will benefit from media cross-selling and reducing redundant costs as well, while MACO (a subsidiary of VGI), which makes outdoor signs like PLANB, will benefit indirectly from this situation as well. Thus, Maybank maintains its BUY rating with a TP-DCF of ฿10.20/share.

 

Alongside Maybank, there are five other security companies who have a positive view on this matter and give a “buy” rating.

Trinity Securities: TP at ฿8.50/share
Bualuang Securities: TP at ฿8.90/share
Tisco Securities: TP at ฿8.90/share
KT Zmico Securities: TP at ฿9.50/share