Samart Telcoms

Modestly above our estimate

Samart Telcoms Plc (SAMTEL)

Modestly above our estimate

SAMTEL reported a Bt193m net profit for 4Q12, up 26% YoY but down 19% QoQ. The reported result exceeded our estimate by 6%, thanks to higher revenue than modeled. Revenue exceeded our expectation by 9%. GM was 22.5% in 4Q12, slightly above our assumption of 22%.

Result highlights

The strong YoY rise was attributable to the low 4Q11 base (flooding) and better cost control. Despite the delay to the TOT 3G Phase 1 project from 4Q12 to 1H13, revenue still rose by 3% YoY and 11% QoQ. Gross profit jumped by 34% YoY and 19% QoQ, thanks to better cost control. GM improved to 22.5percent from 20.8% in 3Q12 and 17.3% in 4Q11. Overall, 4Q12 earnings were strong, despite a few project delays to 1H13.

With regard to the TOT 3G Phase 1 project, SAMTEL installed 400 sites in 4Q12, making for a cumulative total of 3,800 sites at YE12. The total values of new projects signed in 4Q12—such as CAT's Trunked Radio, the BMA's CCTV Phase 2, the BMA's CCTV Special—was Bt1.7bn, of which Bt627m was realized as revenue in the quarter.

Outlook

We expect the remaining Bt2bn in receipts from TOT's 3G Phase for installing another 1,400 sites (for a cmulative total of 5,200 sites by May) to be booked during 1H13. The project backlog at YE12 was worth Bt9.7bn. We expect it to jump to Bt30bn by YE13, underpinned by the TOT 3G Phase 2 project, Advanced Passenger Processing Service (APPS) and four new projects worth Bt5.4bn.

AOT's APPS project will open for tender in March or 2Q13 and revenue recognition should start in 4Q13, given that AOT named a new president in Feb. SAMTEL estimates about Bt135m in revenue from the APPS project in 4Q13. With regard to TOT's 3G Phase 2 project, management expects the tender to open in June 2013 and estimates revenue recognition of Bt4bn in 4Q13.

What's changed?

We maintain our FY13 net profit forecast unchanged. Note that our model doesn't yet include the APPS and 3G Phase 2 projects or three other projects (Department of Land’s National Map project, the PEA’s SmartGrid project and Royal Thai Police’s Trunked Radio project) that SAMTEL is confident of winning.

Recommendation

Our BUY rating stands, premised on a jump in the project backlog to Bt30bn by YE13.