WORK Expects to Rebound in 2H19 from Overhaul Program Reschedule, Analyst Give TP at ฿25

Currently, Workpoint Entertainment (WORK) share price is THB 22.30/share which Maybank Securities has made an analysis of WORK and given a trading buy recommendation with 12 months target price at THB 25.00.

WORK has transformed from fighter to boxer. Meanwhile, the turnaround stage of work has just started. If losing the rating in the previous year is comparable to a boxer that has been knocked out, a rebound in 2019 is a change of style from a fighter, (high investment in copyright for rating), to a boxer who emphasizes the thoroughness, using his strengths of producing content and focusing on profitability.
WORK will overhaul its program schedule, starting with “10 Fight 10”, bringing top-rated actors to fight with the real boxing. The program launched on June 10, 2019, hoping to regain ratings. This should be a positive momentum prior to launching another 10 big programs in 2H19. Meanwhile, the home shopping business has made THB100 million/quarter, +80% QoQ.

In addition to the changing aggressive strategy, in terms of defensive (cost), it adjusted accordingly, both on the production cost (Content cost) -10% YoY, in line with the industry outlook. It also benefited from the remedial measures since the middle of 2Q19, causing the amortization of the license to decrease, including exempting MUX rental fees.
This year it has started on 1Q19 earnings of THB75 million, reversing from the QoQ loss. The momentum is still good in 2Q19, returning to a profit of THB100 million/quarter again and will stand out in the second half due to the advertising budget that will start to return to normal after the election period which Maybank estimates in this year’s net profit of THB527 million, +53% YoY.

The target price had calculated by using Forward P/E of 21x based on the average P/E of the past 12 months. Even though the industry is not hot, WORK has started to find a profit base and the profit outlook will start to be at the level it should be from now. EPS growth is expected at +53% YoY, with a %ROE up to 11% from 7%, both from the existing business and the new business with high margin. Given limited downside risk and upside risk ahead, Maybank initiated a trading buy recommendation, with a target price of THB25/share.

Moreover, Maybank has stated on risks of WORK which might come from the competition in the Digital TV business, online media expansion, technology changes and economic slowdown.