• TV operation should improve yoy in 4Q18F but subscription sales will continue to tumble yoy
• Revised down FY18F bottom line to Bt116m loss (instead of Bt160 profit) and cut FY19-20F profit by 27-39%
• NEUTRAL, lowered TP to Bt1.8 (from Bt2.6) after earnings downgrade and moving valuation base to FY19F; challenging for Monomax to offset low demand for MVAS

Expect to remain loss-making in 4Q18F low season

Despite strong TV rating at 1.16, up 11% qoq and 19% yoy, MONO’s TV operation was weak in 3Q18 on lower CPRP compared to top-tier channels, competition, and weak ADEX. We remain convinced MONO should offer discounted ad rates for programs with lower peak rating and different viewing behavior. Ad rate and utilization should be flat qoq in 4Q18 but improve yoy due to a low base. MONO has rebranded Monomax at end-August and aims to be the largest SVOD service provider in Thailand. It plans to increase annual content budget to Bt1.2-1.5bn (from Bt0.8-1.0bn) to boost subscribers from 6.5k to 120k by end-2019 at Bt250 per month (from Bt129). We forecast subscription sales will continue to tumble in 4Q18 as weak demand for MVAS would outweigh rising demand for Monomax service. We expect 4Q18F core operation to improve yoy, but still deliver losses.    

Weaker outlook for digital TV, subscription and movie units  

We revised down FY18F bottom line to Bt116m loss from Bt160m profit, and cut FY19-20F profit by 67-87% after imputing weaker sales at TV, subscription and movie units. We maintain rating at 1.10-1.26 but reduced ad rate and utilization on tighter competition and weaker ADEX. We cut subscription sales by 40-72% to reflect lower demand for MVAS service. MONO revealed its plan for FY19: (i) increase primetime ad rate by 50%, (ii) add Sepak Takraw content to boost TV rating and sponsorship revenue, (iii) introduce new content (e.g. premium Hollywood and local production series) on Monomax and MONO29, (iv) double airtime (from 4 min/day) and increase number of SKUs to 100 (from 25) for 29shopping, and (v) increase number of sponsored concerts to 30 from 12 this year. Except for the subscription unit, all other business units should improve in FY19 due to a low base this year.

Keep eyes on Monomax subscribers and CPRP at MONO29

Our revised Bt1.8/sh TP is based on DCF valuation. We remain skeptical of MONO’s strategy to boost Monomax sales to offset low MVAS demand. It is challenging to compete with global players, while higher marketing and content costs could drag margins. We would like to see visible developments in subscriber numbers and higher CPRP before increasing exposure in MONO.