Thaicom

4Q12F: Close to end of the road for Mfone losses - Mfone filing for bankruptcy, no more losses to THCOM after Feb 2013 - 4Q12F: Bt157mm core, up +85% YoY from satellite businesses - iPSTAR: China and India are coming along and iPSTAR 2 is in the works! - Buy with excellent earnings growth of 160% in 2013F, 52% in 2014F

Dumping Mfone, eliminating impairment. Yesterday, THCOM said that the group failed to meet the conditions required to sell Mfone to INT Management Service Corp within the deadline. It thus decided to instead have Mfone file for bankruptcy. It expects Mfone to officially be in the insolvency process within one month. This will eliminate the quarterly losses of~Bt130mn that have been pulling THCOM down. As THCOM booked the entire amount of investment impairment plus estimated related expenses in 9M12A, its books should see no further impact from Mfone, it says. We expect only the normal loss from Mfone of ~Bt130mn in 4Q12F and ~Bt50mn in 1Q13F.

4Q12F: Bt157mn core (Bt287mn without Mfone). We estimate core profit growth of 85% YoY to Bt157mn in 4Q12F off growth in both iPSTAR (Australia and Malaysia markets) and Thaicom 5 (high demand for satellite TV). Removing Mfone's loss gives a core profit of Bt287mn.

iPSTAR: China and India on the way, now planning iPSTAR 2! The two biggest ever iPSTAR contracts are set to be signed in 1H13, starting with China (the largest market). THCOM already entered into a Framework Agreement to sell the whole capacity of iPSTAR designated for China (~24.4% of total capacity) to Vastsuccess Holdings Limited, with finalization of details by end-March 2013. In India, the second largest market, it has been negotiating with a big conglomerate to take the rest of its India capacity; total capacity in India is ~16.1% of total capacity, that remaining to be taken up is ~13% of the total. We believe iPSTAR could achieve our estimate of 40% utilization at end-2013 (from 25% in 3Q12). This progress has encouraged management to hasten the launch of iPSTAR 2 (Thaicom 8) by early 2016, according to the press.

Earnings: up 160% in 2013F, 52% in 2014F. THCOM is expected to top all other growths in its sector 2012-2014. We estimate excellent earnings growth of 160% in 2013F and 52% in 2014F. Apart from iPSTAR finally taking off, conventional satellites are in high demand and to meet this demand, Thaicom 6 will be launched in ~mid-2013. This satellite will be immediately in the black: 36% of its transponders are already booked - above breakeven level of 30%. It will also put Thaicom 7 in orbit in 2014. Key to profit will be elimination of Mfone and its annual losses of Bt400-500mn.

Reiterate Buy and TP Bt29. THCOM will be shining in 2013 with both earnings growths and big news (big contracts in China and India) and progress in listing Laos Telecom on the Lao stock market. The stock is currently trading at only 7.5x EV/EBITDA vs. its ten-year average of 8.4x. We maintain Buy and 2013 TP of Bt29 consisting of Bt27 per share for satellite and telephony (based on DCF, 9.8% WACC and 1% terminal growth) and Bt2 per share for its 42% in CSL (with TP of Bt9).