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Jasmine International

Share price with low downside. Good to speculate on infrastructure fund HOLD

Jasmine International Plc (JAS)



- 4Q13 profit unchanged qoq due to increasing extraordinary expense

JAS’s 4Q13 net profit was at B757m, staying unchanged qoq, as a result

of B35m extraordinary expense (B19m Fx loss and B15m impairment of

assets), versus B7m extraordinary loss in 3Q13. Excluding extraordinary

items, 4Q13 normalized profit was B791m, growing 3.8%qoq. FY2013

net profit was B3bn, growing 48%yoy, and FY2013 normalized profit

was B3.02bn, growing 49%yoy but 5% below our expectation. 4Q13

service revenue grew by 4.3%qoq to 2.9bn as the number of hi-speed

internet subscribers rose by 4.6%qoq (60,000 subscribers/year).

However, additional investment on the network lowered gross profit

margin from 59.1% in 3Q13 to 58.6% in 4Q13, decelerating from

previous quarters. At the same time, 4Q13 interest income increased

three folds qoq, and 4Q13 effective tax rate dropped from 16.3% in

3Q13 to 15% (currently asking for causes), benefiting JAS.

- Normalised profit to grow, but net profit to drop if increase provision

We project FY2014 normalized profit to grow further. The number of hispeed

internet subscribers is expected to reach the target of 200,000-

300,000 subscribers/year, as there would be more subscribers who will

set-up home-wifi at home for smartphone. FY2014 normalized profit is

projected to leap by 35%yoy. However, for FY2014 net profit forecast,

we make a conservative assumption that B3.3bn extraordinary loss

(debt provision) would be recognized. JAS previously made a haircut

during its business rehabilitation plan. The court overturned the plan

afterward, so JAS might have to make a debt provision in case that the

debtor demands repayment. Currently, JAS has no plan make the

provision as the debtor has not demanded repayment. Under the

conservative assumption, we project FY2014 net profit at B838m,

contracting 72%yoy.

- Price already absorbs bad news. Good to speculate on infrastructure fund

JAS’s share price has declined by 23% after the court overturned the

rehabilitation plan. Current share price has 22% upside, as the bad news

has been absorbed already. The provision might be made, but the

probability is low. We recommend "HOLD". However, with low downside,

it is advisable to speculate on the news of infrastructure fund

establishment (completed at end-1H14). JAS’s FY2013 dividend will be

paid at B0.25 (3% dividend yield). XD date is 21 February 2014.




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