The 4Q02 results that CVD
Entertainment (CVD) announced yesterday were slightly better
than expectations. The company reported normalised profit of
Bt11mn, compared with Bt27mn in 3Q02 and a loss of Bt39mn in
4Q01. However, excluding a write-off of goodwill of Bt26mn,
CVD would have recorded a profit of Bt37mn in 4Q02. For the
full year, CVD turned around from a loss of Bt58mn in 2001
to Bt26mn in 2002.
CVD’s 4Q02 sales were down
4% qoq and 6% yoy to Bt272mn after scaling down and closing
the company’s video rental and tape manufacturing
businesses. Gross margins remained flat with 3Q02 at 32.6%
but improved from 23.8% in 4Q01. Meanwhile, selling and
administration expenses dropped from 26% of sales in 4Q01 to
21%.
The company’s financial
position remains strong with net cash of Bt242mn or
Bt6.7/share.
Going forward, CVD’s
earnings prospects should continue to improve from higher
sales volume on lower unit prices, the number of Hollywood
blockbuster movies to come out in the next six months and
the divestment of its loss-making units. At this point, our
previous 2003 earnings forecast of Bt27mn now looks too
conservative. We will be reviewing our earnings projection
and fair value estimate after talking with CVD’s
management.
Even though CVD shares rose
30% yesterday to Bt13.0, exceeding our previous fair value
estimate of Bt11.3, we are maintaining our BUY recommendation
at this point until completing our earnings forecast review.
CVD 4Q02
results
