Jasmin International

Stepping ahead with new technology, boosting new fair value to B7.8 BUY

Jasmin International Plc (JAS)

Q4 2012 norm profit to grow 12% QoQ, driving FY2012 profit over projection



In 4Q12, JAS was the first to increase the speed of high-speed internet from

7Mb/second to 10 Mb/second for both existing and new customers under the same

price of B590/month. Accordingly, the subscriber volume in 4Q12 has increased to hit

the year's peak at 64,000 units. At end-2012, the customer base stood at 1.23 million

persons. Combined with the average revenue per user per month that is likely to

stabilize continuously at a high level, 4Q12 operating income is projected to increase

by 4.3% QoQ to B2.67bn. For the gross profit margin, it would stand at the same level

of the prior quarter. In addition, the administrative expense tends to stabilize from

3Q12, which is better than our earlier projection due to the company's bonus provision

in 9M12 (unlike preceding years which JAS would recognize only once in the 4th

quarters). Accordingly, the norm profit is projected to grow by 11.7% QoQ to B600m.

Nevertheless, since B78m of FX gain had been recognized in the previous quarter,

4Q12 net profit is projected to only stabilize from 3Q12 but it would help boost FY2012

net profit to grow by 202percent from last year to B2.17bn (higher than projected by 10%).

Stepping ahead with new technology, boosting profit by 13.7%

We're convinced that JAS is efficiently ready for both long- and short-term

competitiveness due to the plan of aggressive technology development in 2013. The

investment budget of B2bn would be used for the new technology "fiber to the home"

(FTTH) which relies on fiber optic instead of the copper drop wire (ADSL), connecting

from JAS's main network to service areas such as houses. At present, the company has

already switched to apply FTTH with end users in 10 main provinces. This new

technology could beat the competitor like TOT's ADSL due to its maximum speed which

is 100x faster. Moreover, the maximum speed is also higher than TRUE's DOCSIS (data

over cable service interface specification) by 1x. In addition, JAS now has become

strong enough against the new competitor like CTH (Cable Thai Holding Plc.) who had

just won the bid to broadcast English Premier League (EPL) and is laying out its

business plan to install FTTH wire in order to provide internet and cable TV service in1-

2 years ahead. According to the new technology, JAS is advantageous for its

competitiveness in a short term, also erasing our concerns toward long-term

competition. From our international study, this is currently the time of change from

ADSL to FTTH (as illustrated on the following page). Combined with 2012 operating

result that tends to go much further than projected, we revise up our forecast of 2012,

2013 and 2014 net profit by 10.4%, 13.3% and 16.7% to B2.1bn, B2.8bn and B3.5bn

respectively. This is under an assumption of new subscribers in 2013 and 2014 from

200,000 units/year revised up to 250,000 units/year in order to be in line with JAS's

target and as a leader who first launched new technology into the market. Under the

new forecast, 2013 and 2014 norm profit is projected to grow by 35% and 24.6%

respectively.

Profit growth above big stocks. New fair value is B7.80. Upgrade to "BUY"

Due to the company's potential growth, we upgrade our recommendation from "HOLD"

to "BUY". The new fair value, using DCF, stands at B7.80 with 27.8% upside. However,

JAS is still open to 2 risks from the past; 1) a chance of extraordinary loss due to

specific provision from TOT's B2.5bn of unpaid debt, and 2) the loss that might come

from TT&T at around B250m from TT&T's unpaid debt of B190m and revising down the

market price from holding TT&T by 338 million shares at the recent closing price before

ceasing trading at B0.13; however, the mentioned risk is considered around

B0.30/share.