Strong fundamental factors. Share price drops BUY
Thaicom Plc (THCOM)
2Q14 net profit made a new high after THCOM stopped recognizing
rental cost from rented satellite for Thaicom 6 project. THCOM’s 2H14
profit is expected to rise; Thaicom 7 will be launched in 3Q14,
immediately generating profit. We reiterate BUY.
- Stops recognizing rental cost from Thaicom 6 project, boosting profit
2Q14 net profit was reported at B498m, growing 24%qoq and 126%yoy.
Excluding B13m Fx loss, 2Q14 normalized profit made a new high at B510m.
Operating cost (cost of service + SG&A) decreased by 14%qoq; THCOM
stopped recognizing rental cost from rented satellite for Thaicom 6 project after
the delayed launching of actual Thaicom 6 (B170m/quarter rental cost, ended
in March 2014). In addition, service revenue rose by 3.1%qoq to B2.44bn
mainly thanks to higher utilization rate of Thaicom 6; according to the NBTC’s
rule, operators of 36 new digital TV channels (24 commercial channels + 12
public channels) need to rent satellite bandwidth capacity.
- Prosperous business in 2H14
1H14 net profit made up 47.5% of FY2014 earnings forecast. THCOM’s 2H14
profit is projected to be stronger than 1H14, mainly thanks to negotiation on
sales of satellite capacity: Thaicom 6 (30% of its capacity will be provided in
Africa) and iPSTAR (looking for deal in India, the Philippines, Indonesia and
Australia). THCOM will launch Thaicom 7 in 3Q14. Though Thaicom 7 cannot
provide broadcast service like more advantageous Thaicom 5 and Thaicom 6
(most TV satellite dishes in Thailand are positioned to face the satellites), it can
generate profit immediately. THCOM has already migrated non- broadcast
subscribers (e.g. mobile backhaul network) from Thaicom 5 to Thaicom 7, so it
would benefit in two ways: 1) Thaicom 5 has more available capacity to provide
broadband service. 2) Occupancy rate of Thaicom 7 is as high as 50% of its
capacity (exceeding the breakeven point of 40-45%). Overall, we maintain our
earnings forecast, projecting FY2014 net profit at B1.8bn, growing by 67.2%
(most outstandingly among ICT sector).
- Fair value implies 41% upside. BUY
We maintain our fair value at B50, implying 41% upside. We reiterate BUY; its
P/E ratio is lower than the global satellite stocks’ average P/E ratio of 22.7x.