GMA Network Q1 2017 Results 6/1/17
GMA Network reported Q1 2017 results recently. Revenue decreased by 4% due to PHP40 million in political advertising in Q1 2016. Without the gains associated with last year’s elections, revenue grew by 15%.
Operating expenses grew by 5% due to a 12% increase in production costs. Production costs are a fixed costs that allows the company to take advantage of its size so the company should spend as much as it efficiently can to stop smaller peers from being able to compete. The increase in production costs came with a 4% decrease in other general and administrative expenses. The decrease in revenue from political advertisements led to a decrease in EBITDA and net income.
Q1 2017 brought no surprises. The company’s competitive position is very strong as it is one of the largest firms in an industry with economies of scale and customer captivity. Despite the strength GMA’s competitive position, the company is trading on an NOPAT yield of 13.0% providing a sufficient margin of safety. We are increasing our position size to 6.0%.