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Samart I-Mobile

Most outstanding growth in the group BUY

Samart I-Mobile Plc (SIM)

- 2Q14F: good, net profit expectation of Bt290mn, core profit Bt282mn

- Set-top box sales lifts sentiment and net profit in 4Q14 and into 2015

- SAMART to increase free float of SIM through distribution to nine dealers

- BUY with huge upside to target price of Bt4.50 (15x 2015 PER)


2Q14F (announced August 9) now expected at Bt290mn, +13%YoY and +48%QoQ,

with core profit of Bt282mn, +10%YoY and +44%QoQ on a Bt7.8mn FX gain. This is below

our earlier expectations, as management guided to a lower gross margin in 2Q14 of

22.8percent from the earlier 24%. Backing the quarter's good earnings is the introduction of

17 new mobile device models (10 smartphones, 2 basic phones and 5 digital TV

smartphones).

Total cell phone sales volume is estimated at 1.23mn units, up from 1.08 units in

1Q14, and 1.15mn units in 2Q13. The proportion of smartphones has risen to 70percent from

67% in 1Q14 and 37% in 2Q13. Sales price per unit is estimated at Bt2,698, down from

Bt2,937 in 1Q14 and Bt2,413 in 2Q13. This is below our from previous Bt2,966 as there

was a higher proportion of basic phones sold in 2Q14. SIM has raised its goal for total

unit sales to 4.5mn from 4.0mn.

Set-top box sales lift sentiment and net profit in 4Q14 into 2015. Now that the

amount of the discount coupon for digital set-top boxes has been set at Bt690, the

first 11mn coupons of the maximum of 25mn to cover Thai households will be issued in

mid-September and are good for six months. Parent SAMART targets 2014 sales of

1.0mn units, or 10% market share, rising to 1.5-2.0mn units in 2015 or 20% market

share. Since the coupons can also be used for televisions with digital TV tuners,

SAMART, most famous for its antennas, expects its market share for the requisite

antennas to exceed that of the set-top boxes. SIM will carry both the set-top boxes

and antennas and expects to get 30% of SAMART's set-top-box and antenna sales

combined, with a profit of ~Bt50 per unit of set-top-box with antenna.

SAMART to boost free float. After raisings its holding in SIM to 74.11percent from 51% in

SIM by buying shares from Malaysia's Axiata, SAMART is working to increase free float.

SAMART plans to sell ~5% of its stake in SIM to nine of its dealers and distributors. It

will announce the deal on 30 July. This would raise SIM's free float to 20percent from 15.27%.

We expect another reduction later on to raise the free float to 30%.

Buy, target price Bt4.50. SIM continues to enjoy overwhelming acceptance of its own

brand of smartphones and 3Q14 looks even better than 2Q14 on the launch of ten

more models of its branded devices. We note that one of the major pillars of its

success is its after-sale service. We expect an impressive interim dividend of Bt0.075 per

share, XD by the end of August. We have raised our 2014F DPS to Bt0.15 from Bt0.11,

giving annual yield of 4.5%. We value SIM based on a 2015 PER of 15x. We still BUY.


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