Value of Temasek stake drops dramatically
The value of Temasek Holdings' stake in Shin Corp Plc has fallen Bt57.8 billion since it took over the company five months ago.
Based on Shin's Bt28 closing share price on June 26, the value of Temasek's stake in Thailand's largest telecom holding company has shrunk to Bt81.36 billion from Bt143.11 billion.
However, Temasek received a Bt3.9-billion interim dividend paid by Shin for its operations in the second half of 2005.
Singapore's holding firm in late January spent Bt73 billion to acquire 1.49 billion shares from the Damapong and Shinawatra families at Bt49.25 each. It also spent another Bt69.84 billion to acquire 1.42 billion Shin shares from minor shareholders at the same price.
Temasek now owns a 96.12-per-cent stake in Shin.
Shin's total market capitalisation, has fallen 38 per cent to Bt89.46 billion from Bt144.74 billion at the date of Shin's acquisition.
The market capitalisation of Shin's affiliates has also declined significantly.
iTV Plc took the hardest blow among Shin's affiliates with a 97.7-per-cent loss in market capitalisation to Bt333 million from Bt14.36 billion.
Advanced Info Service Plc (AIS), Shin's flagship cell-phone service business, saw its market share fall to Bt247.93 billion from Bt306.92 billion.
Shin Satellite Plc declined to Bt11.89 billion from Bt16.91 billion, and CS Loxinfo Plc (CSL) slipped to Bt2.33 billion from Bt2.53 billion.
A market observer said that such losses, however, are just accounting losses because Temasek took over Shin for a long-term investment and it has not sold any shares.
The lingering uncertainties surrounding the stock market can mainly be blamed for the poor performance of Shin Corp, he said, adding that big market capitalisation stocks - PTT Plc (PTT), PTT Exploration and Production Plc (PTTEP) and Bangkok Bank (BBL) - have all suffered the same fate.
Despite the steep decline in AIS's share price, Capital Nomura Securities has a neutral rating on the stock.
The brokerage estimates that mobile-phone service providers will not be able to begin 3G operations in 2007, pointing to uncertainty about the frequency allocation.
The 3G mobile phone service is expected to be postponed for another two or three years, the broker said.
The 3G concession would come as a boon to cell-phone service providers as costs incurred from the current concession contracts would fall dramatically.
The intense competition will make AIS's second quarter and third quarter disappointing.
KGI Securities (Thailand) said that it had upgraded its recommendation for stock from sell to long-term buy following its sharp decline in share price.
The broker has set a target price for the stock at Bt88 apiece.
"AIS's share price ahead of the second-quarter earnings announcement will move narrowly because of anxiety over the airtime price-cutting war. The current share price already prices in negative factors and the new promotion reduces a degree of price-cutting competition," the broker said.
However, Phillip Securities has a "buy" rating on AIS.
The broker said that the company's earnings next year would improve from the expected poor earnings this year.
This assumption is based on the fact that a new promotion, which alleviates price-cutting competition, would improve average revenue per user.
Besides, a new interconnection charge, which is expected to be implemented next year, should boost the company's earnings.