In March Core Pacific-Yamaichi revised down its profit forecast for Television Broadcasts (TVB) by 9 per cent to HK$601.6 million for this year and by 21 per cent to $604.7 million for next year.
The broker said it believed TVB's pay-television venture Galaxy, for which is had finally secured a strategic investor, would incur start-up losses in the first three to four years but would enhance value in the long term because the pay-TV market was under-penetrated.
In the short term the broker recommended buying the counter after a share-price correction was settled, with a suggested entry price of $21. TVB closed at $41.60 on Friday.
The Galaxy service is due to be launched this month. Galaxy and Hong Kong Broadband Network, a subsidiary of City Telecom, are two of the four major pay-TV operators in Hong Kong and compete with i-Cable Communications and PCCW's Now Broadband TV.
In October TVB said advertising sales in July and August improved from the same period in 2002, largely boosted by the improved economy and the annual Miss Hong Kong Pageant. It had recorded a profit of $589.91 million in 2002 and a 4.2 per cent decline in earnings to $155.1 million in the first six months of this year. Its local business posted an operating loss of $10.73 million - compared with a $143.05 million profit previously - after it spent $2.1 billion building TVB City in Tseung Kwan O and buying equipment.
In October TVB announced it would increased advertising rates averaging 8 per cent next July.
