iTV sheds 25% of market value after losing tough court battle
Investors yesterday dumped iTV shares, leading to a 25-per-cent plunge in the company's share price, following the Supreme Administrative Court's landmark ruling that iTV must be subject to the original concession fee and programming ratio.
iTV dropped 26 per cent to Bt2.06 immediately after the afternoon bell rang. At the close, it was Bt2.10, 25 per cent lower than the previous closing. Trading turnover was Bt631.38 million. The nosedive was in line with recommendations by brokerage houses for all investors to sell the company, considering that losing in the Supreme Administrative Court would entail a big loss. Kim Eng Securities, Asia Plus Securities and Seamico Securities said the court ruling meant iTV would resume paying greater concession fees, which would hurt its profitability badly. In addition, iTV is at high risk of having to pay penalties - estimated at Bt100 billion - for revamping its television programming over the past three years. Also, it is possible that the concession agreement could be revoked. As such, iTV's fair value is unpredictable. "We see the PM's Office's penalty interpretation corresponding to its news/entertainment programme ratio agreement as being quite high, so that other parties will not be tempted to breach the agreement," Seamico said in a report. "Meanwhile, iTV's calculation method has been based on prime-time advertising air time of only one minute, which is too low and will tempt other parties to breach their agreements. Such a high penalty would definitely burden iTV. Even worse is that the concession agreement may be revoked. Therefore, we put its fair value at zero in this scenario." iTV estimates the penalties, based on prime-time advertising air time, will be about Bt200 million to Bt300 million, but the PM's Office is calculating them on a daily basis, which would put them at more than Bt94 billion. Brokerage houses expect iTV to post net revenues of about Bt500 million this year. However, the court's ruling means iTV must be subject to the original concession fee of Bt1.1 billion annually or 44 per cent of total revenues. It also must shoulder accrued concession fees of Bt2.3 billion. As such, its earnings will turn to losses of Bt229 million next year and Bt160 million in 2008, exclusive of the burden from the hefty fines.
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