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Thaicom

Strong broadcasting demand for Thaicom 5 and 6, FY14-15

Thaicom Plc (THCOM)

Investment thesis

The CEO urgently arranged an analyst meeting last Friday to clarify

that GRAMMY and CTH will continue to lease THCOM's transponders

even after they form their strategic partnership. We feel more confident

about sustained strong broadcasting demand in FY14-15 following the

analyst meeting. Our BUY rating stands, premised on a solid FY14

earnings profile and scope for upside from Thaicom 7, debt refinancing

and new IPSTAR markets in 2H14.

Solid broadcasting demand for Thaicom 5 and 6

After discussions with CTH and GRAMMY executives, the CEO

confirmed that the two firms have no policy to reduce their usage of

THCOM's transponders. GRAMMY and CTH currently deploy six and

four THCOM transponders, respectively. The CEO also clarified that

although small digital/satellite TV operators might shut down operations

in the future, due to losses, True Visions and PSI will take the vacant

transponder capacity. Note that one transponder can serve 12-14

standard-definition (SD) channels or 3-4 high-definition (HD) channels.

True Visions may need at least one more transponder to cater to its

new HD channels. PSI is now expanding its coverage to Laos and

Cambodia and requests additional transponders from THCOM.

Currently, clients for 5-6 transponders—2-3 new clients and 3-4

existing clients—are queuing up. Moreover, the 36 must-carry digital

TV channels—12 public and 24 commercial channels—will use four

transponders (SD channels) or 6-8 transponders (SD plus some HD

channels and the digital TV content feeds) when all 36 channels are

commercially launched in 4Q14.

About 50% of Thaicom 7's capacity is pre-sold

The CEO said Thaicom 7's launch date of August 26, 2014 might be

delayed to September. Its presales are now 50%, up from 40% at end-

May 2014. We expect presales to reach 60% before the orbital launch

in Aug-Sept and 70-80% by YE14. Thaicom 7 has 14 C-band

transponders up for sale with a targeted overseas client ratio

(broadcasting to broadband Internet) of 49:51.

IPSTAR's greater usage by NBN in 2H14

The Australian NBN client requested additional capacity to provide

higher speeds and will increase its deployment by another 9,000 users

(after surpassing the contracted minimum requirement of 48,000

users). The increased revenue from a Japanese IPSTAR client will

come from end-to-end solutions, such as high-speed WiFi and system

integration projects with Softbank. The Malaysian MEASAT client will

have until YE14 to decide if it will take the remaining 50% of IPSTAR

bandwidth capacity that is allocated to Malaysia.


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