Advanced Info Service
Q4 2012A: Core +22% YoY, Bt5 DPS; raise 3G capex NeutralAdvanced Info Service Plc (ADVANC)
Q4 2012A core profit up 22%, essentially in line.
Q4 2012 core profit rose 22% YoY to Bt8.4bn, thanks to 33% YoY growth in non-voice revenue with 65% YoY growth in mobile data revenue. This is a small 7% below SCBS due to Bt377mn write-off of obsolete equipment (on the SG&A). It announced a Bt10.9 DPS on 2012, implying only 93% payout vs. the 100%+ policy due to two extra items, with Bt5 DPS on 2H12 (2.4% yield). XD is Apr 1 with payment on Apr 23.
- Service revenue grew 9% YoY to Bt28bn. Basic voice revenue rose 2% YoY to Bt19.2bn, with the key driver being a 33% YoY growth in non-voice revenue to Bt7.2bn or 26% of total service revenue. Mobile data revenue jumped 65% YoY with data usage up by 0.7mn in 4Q12 to 12.2mn (including 4.5mn 3G-900 MHz subs).
- Total subs grew by 420k to 35.7mn; blended ARPU rose 6% YoY to Bt267, thanks to non-voice growth.
- There were two extra items hurting DPS: 1) Bt2.5bn impairment of investment in DPC (whose concession ends this Sep) and 2) Bt723mn adjustment of employee benefit obligations. These did not impact consolidated P&L but eroded company-only retained earnings and DPS. We were overly conservative in our estimate of these items, thus its 2H12 DPS of Bt5 is above our forecast of Bt4.77.
3G-2.1 GHz guidance: Heavy spending, conservative margins.
- ADVANC raised 2013-2015 capex guidance to Bt70bn from Bt50bn with an aggressive plan to cover 97% of the population with 20K 2.1GHz sites. It intends to build a stand-alone network as it will not own the 2G assets after concession ends in 2015.
- With high start-up and roaming costs in the early stages, management expects EBITDA margin to decline to 41-42% in 2013F from 43.5% in 2012A.
- Management expects 8-10mn 3G-2.1 GHz subs in 2013, implying up to 26percent sub migration by yearend. We are revising our 2013 yearend assumption of 3G take-up rate to 25percent from 20%. Note that this is still more conservative than company guidance for 3G subs. However, revenue migration is likely to be faster because the early migrations are expected to be premium customers.
Maintain Neutral despite LT good outlook. Our 2013 DCF-derived TP is kept at Bt230 after raising 2013-2015F capex but speeding up 3G take-up rate. Despite potentially large benefits from new 3G-2.1 GHz license via the reduction in regulatory cost and expansion in wireless broadband service nationwide in the LT, we see ST earnings pressure from 3G start-up costs and project no earnings growth in 2013F. We thus keep our rating Neutral.