WE D 16 N O V 2016

GMA NETWORK, INC:

9M16 results beat forecast on higher than expected
revenues
Earnings reach an all-time high of Php3.1Bil. GMA7 registered a net income of Php733Mil in SHARE DATA
3Q16, up 3.9% y/y. This brought net income in 9M16 to an all-time high of Php3.1Bil, up 72.4% y/y,
compared to the Php1.8Bil registered in 9M15. Results were above COL and consensus estimates, Rating BUY
representing 90.4% and 108.0% of full year forecasts, respectively. The outperformance was mainly Ticker GMA7
due to higher-than-expected revenues for the period. Revenues grew 24.1% to Php12.8Bil. Aside
Fair Value (Php) 8.72
from the presence of political advocacies which amounted to Php1.5 Bil, GMA7 registered a 10.7%
increase in recurring revenues which was faster than our forecast of a 7% increase. Current Price 6.14
Upside (%) 42.02
Compared to revenues, total operating expenses grew at a much slower pace of only 10.0% to
Php8.4Bil which led to improvements in operating and net margins to 34.2% (from 25.5% in 9M15)
and 24.3% (from 17.5%), respectively. (see exhibits 1 & 2)
SHARE PRICE MOVEMENT
Airtime revenues continue to drive growth. GMA7’s revenues reached Php4.0Bil in 3Q16, up
10.5%y/y. This brought revenues for 9M16 to Php12.8Bil, up 24.1% compared to the same period 110
last year. Results outperformed both COL and consensus estimates, accounting for 79.5% and
81.7% of full year forecasts respectively. Revenue growth was driven by stronger-than-expected
performance of airtime revenues and the presence of political ads. Airtime revenues grew 24.5% 100
to Php11.7Bil, which included political ads amounting to Php1.5Bil. Excluding revenues from pol
ads, recurring revenues for the 9M16 period grew by 10.7% to Php11.3Bil. According to GMA7, the
growth in recurring revenues was due to the 12% hike in regular advertising load. 90

Operating expenses grow in line with expectations. Total operating expenses increased by 10%
to Php8.4Bil, in line with expectations at 75% of full year forecasts. Broken down, production costs 80
grew by 10% to Php4.6Bil driven by talent fees and additional costs for election activities. GAEX 16-Aug-16 16-Sep-16 16-Oct-16 16-Nov-16
also increased by 10% to Php3.8Bil due to higher personnel cost brought about by CBA adjustments GMA7 PSEi

and mid-year bonus for employees. The significant increase in revenues coupled with the slower
growth in operating expenses allowed 9M16 operating income to grow 66.4% y/y to Php4.4Bil from
Php2.6Bil.
ABSOLUTE PERFORMANCE
Reiterate BUY rating. We remain positive on GMA7’s outlook as earnings continue to outperform
forecasts throughout the year. We are reiterating our BUY rating on GMA7 with a FV estimate of 1M 3M YTD
Php8.72/sh. Upside potential to our FV estimate remains material at 41.8%.
GMA7 -1.44 -3.61 -11.01
PSEi -5.72 -12.74 0.20
FORECAST SUMMARY:
in PhpMil 2013 2014 2015 2016E 2017E
Revenues 12,951 11,983 13,727 16,095 15,248
% change y/y 7.2 (7.5) 14.6 17.2 (5.3)
MARKET DATA
EBIT 2,416 1,478 3,063 4,921 3,445
% change y/y 4.0 (38.8) 107.2 60.7 (30.0)
EBIT margin (%) 0.2 0.1 0.2 0.3 0.2
Market Cap 20,636.83Mil
EBITDA 3,719 2,925 4,647 6,441 5,016 Outstanding Shares 3,361.05Mil
% change y/y 8.7 (21.3) 58.9 38.6 (22.1)
EBITDA margin (%) 0.3 0.2 0.3 0.4 0.3 52 Wk Range 6.11 - 7.46
Net income 1,667 1,005 2,115 3,423 2,400 3Mo Ave Daily T/O 1.00Mil
% change y/y 3.1 (39.7) 110.5 61.8 (29.9)
Net margin (%) 12.9 8.4 15.4 21.3 15.7
EPS (Cents) 0.34 0.21 0.44 0.70 0.49
% change y/y 3.0 (39.7) 111.1 61.1 (29.9)

RELATIVE VALUE
P/E (X) 17.9 29.7 14.1 8.7 12.4
Frances Rolfa Nicolas
P/BV (X) 3.4 3.6 3.3 2.8 3.0 Research Analyst
ROE (%) 19.7 11.8 24.6 35.0 23.6 rolfa.nicolas@colfinancial.com
Dividend yield (%) 4.1 4.4 4.1 6.5 10.3
so urce: GM A 7, COL estimates

Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside of
the COL Financial website as these may be subject to tampering or unauthorized alterations.
 E ar n i n g s A n al ysi s I GMA Networ k Inc.

WED 16 NOV 2016

Exhibit 1: Results Summary

% of estimates
in PhpMil 3Q15 3Q16 %Change 9M15 9M16 %Change
COL Consensus
Revenues 3,660 4,043 10.5 10,313 12,803 24.1 79.5 81.7
Operating Income 1,027 1,000 (2.7) 2,630 4,376 66.4 90.3 88.9
Operating margin (%) 28.1 24.7 - 25.5 34.2 - - -
EBITDA 1,403 1,493 6.4 3,812 5,670 48.7 88.0 102.3
EBITDA margin (%) 38.3 36.9 - 37.0 44.3 - - -
Net income 706 733 3.9 1,804 3,111 72.4 90.4 108.0
Core margin (%) 19.3 18.1 - 17.5 24.3 - - -
So urce: GM A 7, COL estimates, B lo o mberg

Exhibit 2: Revenue breakdown

in PhpMil 3Q15 3Q16 %Change 9M15 9M16 %Change
Airtime 3,304 3,607 9.2 9,373 11,672 24.5
Non-airtime 356 436 22.3 940 1,131 20.3
Total Revenues 3,660 4,043 10.4 10,313 12,803 24.1
Less: Political ads - 88 1,488 -
Recurring revenues 3,660 4,043 10.4 10,225 11,315 10.7
So urce: GM A 7, COL estimates

Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside 2
of the COL Financial website as these may be subject to tampering or unauthorized alterations.
 E ar n i n g s A n al ysi s I GMA Networ k Inc.

W ED 16 NOV 2016

Important Rating Definitions

BUY
Stocks that have a BUY rating have attractive fundamentals and valuations based on our analysis. We expect the share price to outperform the market in the
next six to 12 months.

HOLD
Stocks that have a HOLD rating have either 1) attractive fundamentals but expensive valuations 2) attractive valuations but near-term earnings outlook might
be poor or vulnerable to numerous risks. Given the said factors, the share price of the stock may perform merely in line or underperform in the market in the
next six to twelve months.

SELL
We dislike both the valuations and fundamentals of stocks with a SELL rating. We expect the share price to underperform in the next six to12 months.

Important Disclaimer

Securities recommended, offered or sold by COL Financial Group, Inc. are subject to investment risks, including the possible loss of the principal amount
invested. Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and said
information may be incomplete or condensed. All opinions and estimates constitute the judgment of COL’s Equity Research Department as of the date of the
report and are subject to change without prior notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase
or sale of a security. COL Financial and/or its employees not involved in the preparation of this report may have investments in securities of derivatives of the
companies mentioned in this report and may trade them in ways different from those discussed in this report.

COL Research Team

April Lynn Tan, CFA

VP & Head of Research
april.tan@colfinancial.com

Charles William Ang, CFA George Ching Richard Lañeda, CFA

Deputy Head of Research Senior Research Manager Senior Research Manager
charles.ang@colfinancial.com george.ching@colfinancial.com richard.laneda@colfinancial.com

Frances Rolfa Nicolas Andy Dela Cruz Justin Richmond Cheng

Research Analyst Research Analyst Research Analyst
rolfa.nicolas@colfinancial.com andy.delacruz@colfinancial.com justin.cheng@colfinancial.com

Kyle Velasco
Research Analyst
kyle.velasco@colfinancial.com

Contact

COL Financial Group, Inc.

2402-D East Tower, Philippine Stock Exchange Centre,
Exchange Road, Ortigas Center, Pasig City
1605 Philippines
Tel No. +632 636-5411
Fax No. +632 635-4632
Website: www.colfinancial.com

Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside 3
of the COL Financial website as these may be subject to tampering or unauthorized alterations.