Temasek's share sale plan likely to lift shin corp

Brokers have recommended "buy" for the stock with target price of around Bt37 to Bt39, saying the current market price represents a 42 to 47 per cent discount on net asset value (NAV).

"We've maintained that a reduction by Temasek of its stake in Shin Corp would remove a key overhang on the stock, allowing a re-rating. Shin Corp filed a statement with the SET on June 16, announcing plans to raise its free float - now below 4 per cent - through a public offering of shares of its existing shareholder," Citi Thailand said in a research paper.

Temasek now owns 96.11 per cent in Shin through Cedar Holdings and Aspen Holdings.

Citi Thailand has set a target price for Shin stock of Bt39.

"Still, we note that this announcement puts on record Temasek's plans for its shareholding. The stock is currently trading at what we see as an unwarranted 47-per-cent discount on our estimated NAV, and a 35-per-cent discount on the market price of AIS."

Citi Thailand estimated that Shin would pay dividend of Bt2.59 per share, representing a 10.4-per-cent dividend, for its 2008 financial results.

It expects to see a recovery in Shin Corp dividends this year as it resumes its policy to pay to its shareholders dividends received from associate Advanced Info Services.

Last year's ability to pay dividends was curtailed by an accounting change, which led to insufficient retained earnings, the research

stated.

Citi Thailand said key downside risks, which could prevent the shares from reaching their target price, include the disposal by Temasek of a stake at a significant discount on the target price and a negative re-rating of major associate Advanced Info Service on irrational competition putting pressure on profits.

Cancellation of concessions of major investments AIS and Thaicom (formerly Shin Satellite) as a punitive measure against violation of foreign-ownership limits was another risk, the paper said.

Trinity Securities said in its note that Temasek's plan would be positive for Shin stock as Shin's free float would comply with the SET's requirements, higher trading liquidity would pave the way for the stock to become a choice of institutional investors and retail investors' concerns over low trading liquidity would be eased.

"Based on the current share price, Shin's stock has up to a 42-per-cent discount from NAV, so we think that the stock's downside risk is low," the broker said.

The broker forecast that Shin could pay an annual dividend to shareholders of up to Bt2.50 per share for its 2008 performance.

"We believe that funds will increase holdings in the communications sector after Shin's trading liquidity is raised.

"With a discount of up to 42 per cent on NAV, a 10-per-cent dividend yield and the company's earnings recovery trend after it completely wrote off depreciation in ITV and Capital OK, we estimate fair value at Bt37 and recommend 'buy'," the broker said.