Samart edges up despite analysts' concerns

Samart shares increased 1.67 per cent or Bt0.10 to Bt6.10. On Tuesday, it lost Bt0.10 and on Monday Bt0.05. The stock closed last Friday at Bt6.15. An analyst at Asia Plus Securities noted that the Cambodian government's control of CATS could drag on and affect Samart's profitability.

With average annual turnover of Bt756 million, CATS contributes about 5 per cent of the group's revenue, which is expected to be at Bt17 billion this year. However, CATS contributes about 20 per cent of the group's profit, which is expected to be Bt366 million. Problems at CATS could pull down Samart's earning by Bt0.08 per share, and this would be a negative factor in the short term, the Asia Plus analyst said.

He is also afraid that the complication could continue to affect other businesses of Samart in Cambodia, including the small power plant for Siam Cement's cement facility.

"This development should have a psychological impact on other Samart-linked businesses like Samart Telcoms [70.29 per cent-owned by Samart] and Samart i-Mobile [a 58.28-per-cent owned subsidiary]," he added.

Following the temporary transfer of control starting on Tuesday, Sirichai Rasameechan, executive vice chairman of Samart Corp, yesterday notified the Stock Exchange of Thailand that the Cambodian government had appointed the State Secretariate of Civil Aviation its representative to take care of CATS.

Thai employees remain prohibited from entering the premises. The company is seeking the Thai government's help in smoothing negotiations with the Cambodian government, he said.

A researcher at Kim Eng Securities Thailand said it was unclear what would happen next. For CATS, the worst-case scenario would be the Cambodian government abolishing the company's 22-year concession.

As a result, while the "fair value" of Samart is Bt7.50 per share, it could fall to Bt5.11 when taking into account the loss from the air-control business, worth Bt2.39 per share.

Kim Eng earlier advised investors to buy into the stock when it announced third-quarter earnings of Bt139 million compared to Bt54 million a year earlier. Now the brokerage house is recommending "buy" only when the stock price eases.

An analyst from a local brokerage house, who asked not to be named, noted that Samart's third-quarter earnings were 8 per cent higher than his firm's estimate.

Driving the earnings growth was Samart Telcoms, of which third-quarter revenue doubled year on year to Bt1.4 billion. Meanwhile, Samart also witnessed a 25-per-cent annualised increase in the satellite-dish distribution business, while sales and administrative expenses dropped 19 per cent year on year. In the quarter, Samart i-Mobile's mobile-phone business showed a drop, as consumers are seeking high-end smart phones while the company's strength lies in cheap handsets.

The local brokerage house expects Samart to post a net profit of Bt313 million this year, up 9 per cent from the year earlier. Earnings are expected to rise 25 per cent to Bt422 million, boosted by the economic recovery and renewed demand for mobile phones.

Samart announced earlier that it would pay an interim dividend for this year's nine-month performance at Bt0.08 per share, on December 11.