Samart I-Mobile

Forecast upped!

Samart I-Mobile Plc (SIM)

Investment thesis

We have upgraded our FY13 earnings forecast by 33% in anticipation of: 1) SIM winning a chunk of the Tablets-for-students procurement contract (tender in April) and 2) greater smart phone sales volume in FY13. As such, our YE13 target price jumps to Bt4.70 (up 57%). Our BUY ratings stands, premised on a strong FY13 earnings recovery and an MVNO business turnaround in FY14.

Greater smart phone sales in 1Q13

We now expect SIM to sell 800-850K units of handsets in 1Q13 (we had previously assumed 600K), with growth led by smart phones. The firm sold 360K handsets in Jan, 260K in Feb and expects to sell 200-250K in March. Of total sales, about 600K will be smart phones, against 340K units in 4Q12 and just 1,838 units in 1Q12.

We estimate a Bt2,500 mean sales price for 1Q13, up by 110% YoY and 15% QoQ, thanks to a greater proportion of smart phones in the sales mix and the launch of the higher-priced "IQ6" handset. The current mean prices are Bt4,400 for smart phones and Bt950 for feature phones. Strong handset sales will outweigh the effect of weaker content income and the MVNO's net loss for 1Q13, we anticipate. GM should expand to 23percent from 21.6% in 4Q12 and 17.1% in 1Q12. We now estimate slightly higher 1Q13 earnings of Bt165m, up by 572% YoY and 98% QoQ.

Sales momentum to continue through 2Q13

We forecast 1m handset sales in 2Q13, led by two new smart phone models—Quad Core and BSI Camera—and high season. The mean price will be sustained at Bt2,500, up 103% YoY (flattish QoQ). GM should be sustained QoQ at 23-24%.

Value from Tablets-for-students procurement factored in

The 1.6m Tablets-for-students procurement contract worth Bt4.5bn is scheduled to open for tender on April 24, 2013. SIM expects to get a 400K unit chunk of the procurement. Assuming a slim 5% net margin, a mean sales price of 2,800/tablet and revenue realization in 2H13, we estimate Bt1.12bn in incremental revenue and Bt56m in net profit, boosting our FY13 bottom-line forecast by 11%.

FY13 earnings and target price upgrades

We have upgraded our FY13 net profit forecast by 33% to factor in: 1) anticipation of stronger smart phone sales than earlier assumed and 2) a Bt56m net profit from the Tablets-for-students procurement contract. We have revised up our FY13 handset sales volume assumption by 13% to 3.84m. Our PEG-based target price rises to Bt4.70 (up 57%, an implied FY13 PER of 30.9x) to reflect: 1) the earnings forecast upgrade and 2) an expanded perpetual ROE assumption of 18.4%, up from 18%.