1QFY16 earnings to recover from prior‐year loss.

　　We expect RS 1QFY16 net profit to jump 396.8% y‐y to Bt123mn, recovering from the prior‐yearloss of Bt42mn. Showbiz segment will likely be a key growth driver . Revenue from sales andservices would rise 45.8% to Bt1,174mn with showbiz revenue rising 807.4% to Bt639mn (vsBt70mn) in tandem with project deliveries and ad revenue to decline along with lower ad spendingvia digital TV, satellite TV and radio. Digital TV #8 seeming suffered from falling rating after RSreduce airtime for soap opera in a bid to control cost after ad revenue declined. We expect mediarevenue to fall 27% while revenue from music would drop 45% despite a cease of CD production atthe start of the year, as online downloading seemingly declined. Other revenue, particularly healthy& beauty segment, appears to see moderate growth as a number of audiences at digital TV #8lowered in line with lower rating of digital TV #8, which seemingly led to lower orders. Operatingcost is expected to increase by 19.4%, which deems modest growth thanks to strict control of soapopera production cost. SG&A expense would climb 24.4%.

　　Bright 2QFY16 outlook, media, healthy & beauty biz to see improvement in 2HFY16.

　　RS second‐quarter earnings should be able to benefit from seasonally stronger demand. As fordigital TV #8, the company has lengthened airtime for soap opera program, which pushed longtermad sales to 60% of the channel’s ad revenue target of Bt1,500mn at end‐January. Revenuefrom music would continue to decline while showbiz revenue would lower significantly q‐q after RSdelivered many projects in 1QFY16 but grow further y‐y. Healthy & beauty segment is expected toimprove as rating of digital TV #8 is likely to rise on an increase of soap opera programs, whichwould encourage more orders from audiences.

　　In 2HFY16, showbiz revenue is forecast to drop drastically compared to the first half, which wouldbe offset by potential improvement in media and healthy & beauty businesses. RS aims topenetrate healthy & beauty market aggressively with an official launch to take place in June thatthe company plans to add new brands and product items as well as traditional trade channel,including Tops, Watson and Boots. As such, sales are expected to grow at a rapid pace in the secondhalf while RS aims to drive revenue from healthy & beauty up by twofold within the next threeyears.

　　FY16 earnings forecast unchanged, raising target price to Bt13.10 on treasury stock anddowngrading rating to ‘TRADING BUY’.

　　We keep our FY16 sales & services revenue forecast at Bt4,171mn and net profit projection atBt298mn. RS treasury stock project will end on August 24 after the company bought 28.22mnshares out of its target of 50.7mn shares, which should increase dividend. Using DCF (WACC of9.92% and terminal growth rate of 3%), our target price is Bt13.10 and we reduce our rating from‘BUY’ to ‘TRADING BUY’ to bet on strong earnings results.