February 27, 2013

Tune In As TV Asahi Parlays A Ratings Surge Into Higher Forecast Profits

by Sridharan Raman

TV Asahi Corp. (9409.T) may want to be thankful – very thankful – for the universal popularity of football. After acquiring the rights to broadcast World Cup football matches and other qualifying events in Japan – along with other sporting events popular among the country’s citizens, including aquatic and ice skating competitions – TV Asahi finally managed to break out of its rut to become the most popular prime time channel last year. After a long period during which offering its audience soap operas like the Bold and the Beautiful and Japanese dramas didn’t succeed in attracting enough viewers to enable it to shed its status as the fourth most-popular of Japan’s six domestic national broadcast channels, this is a major transformation. Better still, it could prove to be a profitable one, as the surge in the number of viewers will enable TV Asahi to charge more for advertising time.

The good news is likely to show up in the second half of April, when TV Asahi expects to report its results for the fiscal year ending March 31, 2013. Currently, analysts expect the company to report an operating profit of ¥11.49 billion for the year, according to the I/B/E/S consensus estimate, up from ¥10.64 billion just 90 days ago and higher than the ¥10.5 billion that it reported the last fiscal year. However, the StarMine SmartEstimate stands at ¥12.49 billion, giving the company a positive Predicted Surprise of 8.7%. Some of those who have kept tabs on the broadcasting company’s ratings success are more bullish still; two top-rated analysts have published Bold Estimates that project TV Asahi’s operating profits will exceed even the SmartEstimate. These Bold Estimates tend to lead the way, and increase the odds that as the April 21 date on which TV Asahi plans to announce its actual results, more analysts will boost their own forecasts or else that the company will announce a positive earnings surprise.


Analysts also are taking a more upbeat view of the company’s prospects for the coming fiscal year, as well, as TV Asahi is able to profit from the title of top primetime channel of 2012. Analysts have raised their outlook for the company’s operating profit for March 2014 fiscal year by almost 10% over the course of the last 90 days. Those higher estimates help explain why TV Asahi scores an impressive 92 out of a possible 100 on the StarMine Analyst Revisions Model (ARM), which signals that analysts’view of the company’s earnings growth is likely to remain upbeat.

In each of the last six quarters, TV Asahi has witnessed a slow but steady increase in its revenues on a year-over-year basis. Given that the broadcaster can point to having attracted such a significant number of new viewers in 2012, analysts believe that the odds favor that trend remaining intact. Moreover, as TV Asahi turns that larger audience into higher revenue per minute of advertising time, the rate of growth in revenue could climb still further.


So far, TV Asahi has delivered revenue and earning growth in spite of the country’s still-weak economic situation. If “Abenomics” – the package of stimulus measures and reforms proposed by Japan’s new prime minister, Shinzo Abe – succeeds in finally jolting the country out of its 20-year economic slump, then media companies like TV Asahi could benefit from a flurry of new advertising spending.

SmartEstimates: Thomson Reuters StarMine Professional quantitatively analyzes the earnings estimate accuracy of sell-side analysts and uses this information to create proprietary SmartEstimates®.SmartEstimates help you better predict future earnings and analyst revisions with estimates that place more weight on recent forecasts by top-rated analysts.
Predicted Surprise %: The Predicted Surprise% is the percentage difference between the SmartEstimate and the I/B/E/S consensus estimate. When SmartEstimates diverge significantly from consensus, it serves as a leading indicator of the direction of future revisions and/or surprises. In aggregate, this indicator gets earnings surprises directionally correct 70% of the time.

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