Samart Telcoms

Samart Telcoms Plc (SAMTEL)

Investment thesis

Following the 4Q12 preview meeting, we are more bullish on SAMTEL's FY13-14 earnings outlook. We now anticipate the signings of six key projects this year—TOT's 3G Phase 2, AOT's Advanced Passenger Processing Service (APPS) and four other contracts. The firm's YE13 project backlog target is more bullish than ours—Bt30bn against Bt22bn. Our BUY rating stands with the new YE13 target price of Bt26, premised on a big jump in the year-end project backlog.

Solid 4Q12 earnings expected, despite a delay to 3G Phase 1

We expect SAMTEL to post a net profit of Bt182m for 4Q12, up 19% YoY but down 24% QoQ. The YoY rise was due to the low 4Q11 earnings base (flooding, which caused projects to be delayed) and better OPEX control. The QoQ drop was because a portion of the installation of the TOT 3G Phase 1 project was postponed to 1H13. SAMTEL installed only 400 sites (3,800 at YE12) during the quarter and booked Bt551m in Phase 1 revenue for 4Q12.

The key projects signed in 4Q12 were: 1) CAT's Trunked Radio (Bt410m in total, Bt75m in 4Q12), 2) the BMA's CCTV Phase 2 (Bt360m in total, Bt3m in 4Q12), 3) the BMA's CCTV Special (Bt174m in total, Bt61m in 4Q12), 4) CAT's USO (Bt98m in total) and 5) TOT's Automatically Switched Optical Network (Bt90m in total).

TOT 3G Phase 1 project targeted for completion in May 2013

SAMTEL targets installing all 5,200 sites by May 2013 (4,000 by end-Feb). We estimate that it will recognize the remaining Bt2bn in 3G Phase 1 revenue for 1,400 new sites in 1H13.

The firm's YE13 new backlog target of Bt30bn

Management guides for a YE13 project backlog of Bt30bn, up 209% YoY, with the signings of the following projects: 1) the TOT's 3G Phase 2 (the tender is expected to open in June), 2) the APPS (tender expected in March; signing in 2Q13) and 3) four other projects worth Bt5.4bn, 1Q13-4Q13—an IT system for the Ministry of Justice (Bt1.1bn) in 1Q13, the Department of Land's National Map project (Bt1.5bn) in 2Q13, the PEA's Smartgrid project (Bt1bn) in 3Q13 and an APCO Trunk Radio installation for the police (Bt1.8bn) in 4Q13.

Upgrades to FY13 earnings forecast and target price

We have revised up our FY13 earnings projection by 13% to factor the IT system for the Ministry of Justice into our model. Our PEG-based target price rises by 18% to Bt26. We have not yet factored the TOT's 3G Phase 2, the APPS or the remaining three projects into our model. Those projects would offer scope for upside to our FY13-15 earnings projection.