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Samart Corporation

Above expectations

Samart Corporation Plc (SAMART)

Core profit overshot our estimate

SAMART posted a Bt364m net profit for 4Q13, up 34% YoY but down 7% QoQ. Excluding extra items in 4Q13—a Bt7m FX gain and Bt52m in net extra expenses—core profit would be Bt409m, up by 21% YoY and 2% QoQ. Net profit exceeded our model by 15%, due to recognition of an FX gain (we had modeled for an FX loss). Core profit beat our estimate by 22%, thanks to higher GM and lower tax expenses than assumed. GM was 24.2% (we had modeled for 20.1%).

Result highlights

The strong YoY core profit growth was due to greater profits at SIM and SAMTEL and much lower tax expenses. The modest QoQ decline was because of lower earnings at SIM (tied to a surge in SG&A expenses) and at SAMTEL (seasonally lower revenue—the govt's fiscal year ends in Sept).

SIM posted a Bt189m core profit for 4Q13, up 62% YoY (but down 10% QoQ), led by heavier smart phone sales volume and a greater mean sales price. Blended GM was 24.1% (21.6% in 4Q12 and 22.8% in 3Q13; see details in our SIM report).

SAMTEL posted Bt211m in core earnings for 4Q13, up 55% YoY (but down 12% QoQ), due to greater revenue and lower interest and tax expenses. The top-line rose 12% YoY (but fell 12% QoQ), led by Bt1.8bn in revenue from contracts signed before 4Q13 and Bt400m from new contracts signed in 4Q13 (see details in our SAMTEL report).

Kampot Power Plant (KPP) and One-to-One Contacts (OTO) posted YoY declines in their 4Q13 bottom-lines. CATS, Samart Engineering (SE) and Vision & Security reported YoY bottom-line rises. CATS' earnings rose 7% YoY on a 22% jump in the number of flights. Vision & Security turned around from a Bt12m net loss to Bt16m net profit.

Outlook

We forecast a Bt335m net profit for 1Q14, up 9% YoY (but down 18% QoQ), led by earnings rises at SIM (up 20% YoY but down 6% QoQ) and SAMTEL (up 15% YoY but down 20% QoQ). SIM's 1Q14 drivers are greater smart phone sales volume (600k units, up 57% YoY), a sustained GM of 25% and a higher sales price (Bt2,800, up 10% YoY). SAMTEL's driver is greater revenue, led by Bt1.9bn in income from existing projects and Bt460m from new contracts expected in 1Q14.

What's changed?

Our FY14 net profit forecast stands unchanged.

Recommendation

We have a BUY rating, premised on a cheap valuation and the solid FY14 earnings profile.


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