Asia's Top Performing Media Stock Is Also One of Most Unloved

(Bloomberg) -- Asia’s best performing media stock this year, BEC World Pcl, is also among analysts’ least preferred on concern its valuation has become stretched amid competition from the likes of Netflix.

Shares in Thailand’s biggest television broadcaster soared about 35 percent in April, extending this year’s rally to almost 90 percent. That makes it a standout among Asia’s publishing and media companies with a market value of at least $500 million, according to data compiled by Bloomberg.

But the stock’s consensus rating -- equivalent to a hold -- ranks it sixth lowest among about 100 peers in the region, the data show. BEC World trades at about 60 times 12-month forward earnings, more than double its five-year average.

Costly licensing fees and a slump in television viewing, in favor of online media and platforms such as Netflix, have eroded earnings at Thailand’s traditional media companies.

That prompted the nation’s Prime Minister Prayuth Chan-Ocha to this month invoke measures to support the industry, including allowing digital TV licenses to be returned to the state. BEC World’s shares climbed 10 percent the day the ruling became official.

The broadcaster stands to be the biggest beneficiary of the measure as it will probably return licenses of two television channels that have been a major drag on its earnings, according to Ktb Securities (Thailand) Pcl.

"Earnings should improve significantly with the expected return of two unprofitable TV channels,” said Amnart Ngosawang, an analyst at Ktb Securities in Bangkok. "Still, the stock’s rally may have been too fast, as any cause for optimism is probably too far ahead."

BEC World spends about 400 million baht ($12.5 million) a year on royalty fees and network rental and is studying details including the number of TV licenses it may return, Thai-language Thunhoon reported on its website, citing President Ariya Banomyong.

The company’s board will consider proposals before May 10, the last day for TV digital broadcasters to submit their intention to return licenses, the report said. Ariya wasn’t available for comment in calls placed to his office.

The stock dropped as much as 1.6 percent to 9 baht on Tuesday, before trading at 9.10 baht as of 11:08 am in Bangkok.

The company’s shares slumped to a record low in January, before it posted a net loss of 330 million baht for 2018 a month later.

The annual shortfall was its first since at least 2005, according to data compiled by Bloomberg, and was attributed to a drop in TV advertising spending and a shift in consumer behavior toward watching media online, according to BEC World’s Feb. 22 statement.

--With assistance from Lee Miller.

To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net

To contact the editors responsible for this story: Sunil Jagtiani at sjagtiani@bloomberg.net, Margo Towie, Naoto Hosoda

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