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ABS-CBN Summary

Core Content

ABS-CBN is the largest media company in the Philippines, with a strong core business that includes free-to-air TV, ABS-CBN International, Star Cinema, and SkyCable. The company reported a 25% increase in net income to PHP2b in 2013, aligning with expectations. Its share price is PHP34.80, with a target price of PHP42.50, indicating a 22% upside. The market capitalization is PHP29.2B, and the free float is 16%.

Main Points

• Financial Performance (2013):

  • Net income grew 25% to PHP2b.
  • Total net revenue increased by 15% to PHP33.4b.
  • Operating costs rose by 11% to PHP30.2b.
  • Operating income surged by 69% to PHP3.1b.
  • Advertising revenue reached PHP18.9b, up 16% YoY, with regular ads growing 9% to PHP17.7b.

• Segment Analysis:

  • TV and Studio Entertainment: The largest segment, contributing PHP25.9b in revenue and PHP6.45b in EBITDA.
  • Pay TV Networks (SkyCable): Net revenue increased by 17% to PHP6.94b, with EBITDA up 29% to PHP1.64b.
  • New Businesses: Dragged 2013 earnings with a net loss of PHP954m, primarily from ABS-CBN Mobile and DTT.

• Audience Share:

  • ABS-CBN Channel 2 had a 42% nationwide audience share in 2013, compared to GMA Channel 7's 33%.
  • In primetime, ABS-CBN Channel 2 had a 47% share versus GMA Channel 7's 31%.

• Earnings Guidance:

  • For 2014, management expects flattish net income of PHP1.8b-2b, in line with forecasts.
  • The analyst believes that regular airtime revenue could offset the loss from election-related ads, and cost increases may be tempered.

• Valuation Metrics:

  • Core P/E ratio was 13.9 in 2013 and is expected to be 11.8 in 2015.
  • P/BV ratio declined from 1.4 to 1.0 over the forecast period.
  • Net dividend yield ranged from 1.1 to 1.3.
  • EV/EBITDA ratio dropped from 6.4 in 2012 to 4.2 in 2015.
  • Net debt/equity decreased from 50% in 2012 to 15.3% in 2015.

Key Information

• Capital Expenditure: Total capex was PHP4.9b in 2013, up from PHP4.46b in 2012.
• Cash Flow: Free cash flow increased significantly, reaching PHP11,624.6m in 2015.
• Dividends: Net dividend yield was 1.1 in 2013, with dividends paid decreasing from PHP1,541.8m in 2011 to PHP345.8m in 2015.
• Subscriber Growth: ABS-CBN Mobile has 250,000 subscribers and is expected to break even at 2 million subscribers, assuming an ARPU of PHP300.
• Valuation: The analyst reiterates a BUY rating, suggesting that the valuation is undemanding given the company's dominance in the media industry and potential from new businesses.

Summary of Business Segments

• TV and Studio Entertainment: Driven by free-to-air TV and content production, with strong growth in 2013.
• Pay TV Networks: SkyCable showed robust growth, with a significant increase in EBITDA.
• New Businesses: Continued to underperform, with a net loss of PHP954m in 2013.

Analyst Notes

• The analyst maintains BUY rating and target price of PHP42.50.
• Valuation is considered undemanding, with potential upside from new businesses.
• The company is expected to benefit from strong ratings and regular advertising revenue in 2014.