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Thaicom

Insights into 4Q13

Thaicom Plc

Investment thesis

Following our visit to THCOM, we expect the firm to post robust 4Q13 earnings, driven by the absence of an Mfone loss and greater revenue from conventional satellites (boosted by income from the interim AsiaSat satellite ahead of Thaicom 6's launch) and receipts from China for IPSTAR. Our BUY rating stands, premised on strong FY14 earnings, led by income from Thaicom 6 (starting Feb 2014), Thaicom 7 (in 2H14) and a full year of revenue from China for IPSTAR.

THCOM to post a good 4Q13 core profit

We estimate Bt182m in net earnings for 4Q13, up 47% YoY but down 43% QoQ. Stripping out extra items—Bt72m in extra expenses for Mfone in 4Q12 and FX—core profit would be Bt374m, up by 88% YoY and 2% QoQ. The expected core earnings jump is attributable to: 1) the absence of an Mfone loss, 2) higher revenues for conventional satellites and IPSTAR and 3) better overall OPEX control. We estimate a top-line rise of 9% YoY and 3% QoQ on greater conventional satellite and IPSTAR bandwidth income.

We assume that conventional satellite revenue rose by 28% YoY and 4% QoQ, led by the full quarter receipts from the interim capacity at the 78.5E slot starting August 2013 (Thaicom 6 will start generating revenue in Feb 2014). IPSTAR's bandwidth income should post a rise of 18% YoY and 6% QoQ, led by 2.5 months of receipts from China (estimated at Bt50m in 4Q13) and greater bandwidth usage by TOT (starting April 2013) and three other existing clients—NBN (Australia), BNSL (India) and MEASAT (Malaysia). LTC's revenue should have been stable YoY and QoQ.

Service costs will have risen a further 5% QoQ, due to the lease of the AsiaSat satellite as interim capacity. We assume GM of 40percent for 4Q13 (34% in 4Q12 and 40.7% in 3Q13).

Thaicom 6 to reach EBIT break-even by June

Following its orbital launch on Jan 6, Thaicom 6 will undergo a month of in-space testing. After that, client traffic transference from AsiaSat to Thaicom 6 will start; transference will take about three months. We assume that Thaicom 6's transponder usage will rise to 64% by end-June; its EBIT break-even level is only 50% capacity usage. Of the remaining 34% of capacity, which is allocated to Africa, THCOM targets selling all of it within the next three years. The firm is currently in talks with several prospective African clients.

IPSTAR progress in other countries

Talks are currently in progress with private telcos in Indonesia and the Philippines for IPSTAR bandwidth. The firm will negotiate with NBN to extend its IPSTAR contract, which is due to expire in FY16.




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