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Jasmine International

Strong profit for short term, but weaker in long run HOLD

Jasmine International Plc (JAS)

- Increasing subscribers boost 2Q14 profit

2Q14 net profit was reported at B885m, growing 4%qoq. The number of hispeed

internet subscribers increased from 1Q14 by 63,000 (or 4.3%qoq).

Though 2Q14 ARPU slipped by 1.5%qoq (new subscribers in late-2Q14 were

probably under installation process, so income from them was not included),

revenue from hi-speed internet business (89% of total income) grew by

2.7%qoq. Meanwhile, revenue from other business stayed flat qoq. JAS’s

2Q14 total income climbed by 2.4%qoq to B3.0bn. In addition, 2Q14 cost of

service dropped from 1Q14 by B30m. 2Q14 gross profit margin was 60.8%,

staying unchanged from 1Q14.

- Strong for short term, but weaker in long run

1H14 net profit made up 43% of FY2014 earnings forecast. 2H14 net profit is

expected to be better than 1H14; purchasing power has revived after the

political turmoil receded. In addition, more subscribers have set up home-wifi

at home for smartphone, possibly expanding subscriber base from 1H14. We

maintain our earnings forecast, projecting FY2014 net profit at B4.0bn,

growing 33%yoy. However, JAS’s growth is expected to decelerate in a long

run. After the infrastructure fund is established (not included in our forecast;

it has not been approved by SEC yet and needs to be established in late-

2014; JAS is currently working on prospectus), JAS would have to rent asset

from the fund (B4.8bn/year in the first two years and B9.0bn/year in the next

nine years). Income from the fund (investment on technology to expand

subscriber base) is possibly not strong enough to compensate for the rental

cost. In addition, competition would be fiercer as new rivals (ADVANC, CTH)

have been introduced.

- Limited upside. HOLD and speculate on fund establishment

We maintain our FY2014 fair value at B9.20 (including the risk from debt

provision; JAS has to pay the debt from the haircut during its rehabilitation

plan in case that the creditors make claims), implying only 13.5% upside. We

recommend HOLD and speculate on short-term good news about the

establishment of the infrastructure fund in late-2014. However, TT&T’s

lawsuit against JAS might be a threat on the establishment.


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