Samart Corporation

Core profit overshot estimate

Samart Corporation Plc (SAMTEL)

Core profit exceeded model

SAMART posted a Bt287m net profit for 4Q12, up by 91% YoY and 1% QoQ. Excluding Bt38m in one-off expenses (mostly bad debt provisions), core earnings would be Bt324m, up by 123% YoY and 83% QoQ. Net and core profit exceeded our estimates by 10% and 44%, respectively, due to lower service costs and tax expenses than modeled. Revenues were 5% below our estimate, but gross profit exceeded our expectation by 8%. GM was 23.8% (we had assumed 21%).

Result highlights

The robust 4Q12 core earnings were led by core profit jumps for SIM and SAMTEL. SIM reported a Bt115m core profit, up by 500% YoY and 414% QoQ, thanks to a surge in smartphone sales volume, a higher average sales price and a fatter GM. SIM's GM surged to 21.6% in 4Q12 from 17.5% in 3Q12 (see details in our SIM report).

SAMTEL posted core earnings of Bt193m, up 26% YoY, due to the low base set by 4Q11 flooding and more efficient cost control (but down 19% QoQ). Despite the delay to the TOT 3G Phase 1 project to 1H13, revenue rose by 3% YoY and 11% QoQ and gross profit by 34% YoY and 19% QoQ (see details in our SAMTEL report).

The profits of SAMART's other businesses (except Cambodia Air Traffic Services [CATS]) reported YoY declines. CATS' earnings inched up 2% YoY in 4Q12. Kampot Power Plant (KPP) posted a 25% YoY profit dive. One-to-One Contacts and Samart Engineering reported net losses of Bt13m and Bt22m, respectively. The Vision and Security unit posted an 87% YoY profit decline.

Outlook

We forecast a 1Q13 net profit of Bt320m, up by 19% YoY and 12% QoQ, led by earnings jumps at SIM (up by 552% YoY and 92% QoQ) and SAMTEL (up by 52% YoY and 19% QoQ). SIM's drivers are a projected 80% QoQ jump in smartphone sales, a fatter GM (to 23%) and a higher average sales price (up 18% QoQ). SAMTEL's drivers are Bt843m in revenue from the TOT 3G Phase 1 project and better cost control. We expect SAMTEL to install a further 1,000 sites for 3G Phase 1 in 1Q13 (the remaining 400 sites will be installed in 2Q13).

What's changed?

We maintain our FY13 net profit forecast unchanged.

Recommendation

Our BUY rating stands, premised on a strong earnings recovery for SIM and upside from two big projects for SAMTEL.