Bualuang Securities May 15, 2013
Presales growth for Thaicom 6
Thaicom Plc (THCOM)Investment thesis
Following the 1Q13 analyst meeting, we feel more upbeat about THCOM's FY13-15 outlook, led by greater Thaicom 6 presales and IPSTAR progress in India. Our BUY rating stands.
Net profit as expected, but core profit short of expectation
THCOM reported a Bt331m net profit for 1Q13, up by 681% YoY and 168% QoQ. Stripping out two extra items—a Bt119m FX gain and a Bt51m reversal of an impairment for Mfone—core earnings would be Bt161m, up 127% YoY but down 19% QoQ. Net profit was in line with our estimate. But the core number was 24% below our expectation, thanks to higher SG&A than modeled related to staff, marketing and bad debt provisions. Sales were 3% below our assumption, thanks to a stronger baht. EBIT was 35% below our estimate. The YoY core profit jump was due to the absence of an Mfone loss since Feb 15. The QoQ core profit drop was because of higher SG&A.
The top-line declined by 5% YoY and 7% QoQ, due to a stronger baht. Thaicom 5 revenue rose 8% YoY. IPSTAR bandwidth service & sales posted YoY falls on a stronger baht and lower UT sales. In gross profit terms, Thaicom 5 posted a 7% YoY rise, while IPSTAR saw a 139% YoY jump. The telephone unit posted a gross profit for the first time in years, thanks to the winding up of Mfone on Feb 15.
Thaicom 6 was 60% presold by end-March
The firm signed additional bandwidth sales for Thaicom 6 with Thai and Indian broadcasters in 1Q13, which brought Thaicom 6's total presales to 60% at end-March (up from 38% at YE12). Thaicom 6's orbital launch has been delayed to Sept-Nov 2013 from July, due to a long launch queue. But THCOM will provide an interim satellite at 78.5E in late July to cater to customer demand for bandwidth. Hence, revenue from Thaicom 6 is scheduled to start in Aug or Sept 2013.
IPSTAR progress
Management said that IPSTAR's Chinese revenue will be a minimum of US$80m over the 9.5 years (US$8.4m/annum), which will be recognized starting 2Q13. THCOM also disclosed the exact revenue-sharing figure as 8% (of the actual usage of Synertone's clients). Revenue from TOT's renewed contract (together with higher bandwidth usage) will start in 2Q13 as well. A deal with one small Indian telco (less than 1Gbps) is expected to be signed soon. It is worth about US$3m per annum.
Target price upgrade on higher Thaicom 6 utilization rate
We have revised up our FY13 net profit forecast by 12% to Bt1.3bn to factor in the FX gain and the reversal of an Mfone impairment in 1Q13. Moreover, we have upped our FY14 net earnings projection by 10% to Bt1.7bn because of a higher Thaicom 6 mean utilization rate assumption—from 20% to 50% in FY14. Hence, our DCF-derived YE13 target price rises by 17% to Bt44.50.
