Total Access Communication

Profit to speed up since 4Q12 onward. Reiterate "BUY"

Total Access Communication Plc (DTAC)

Q4 2012 profit's growth projected to return due to acceleration on marketing seasonal benefits

The number of net new additions in 4Q12 is projected to leap from the prior

quarter to 500,000 units due to seasonal benefits and the acceleration on

marketing which is the new prepaid package (SIM15/16) that targets on

teenagers in order to compensate the negative image that is a result of the

network failure during the first 9 months. Accordingly, the average revenue per

user (ARPU) is projected to drop only slightly, so the service revenue is believed

to still grow well by 2.4% QoQ. Combined with the phone sales revenue that is

projected to rise by 80% QoQ due to iPhone 5 sales since December 2012, the

sales and service revenue is projected to grow by 8.7% QoQ. Moreover, the cost

of service has risen only by 1.0% QoQ due mainly to the network cost that has

increased along with the expansion of 3G (850 MHz) network stations by 1,500

units in 4Q12 to 5,000 units. However, this is projected to be partially offset due

to the selling and administrative expenses that have increased by 10% QoQ

which is mainly a result of the marketing expense, extra bonus payment, and the

salary that is revised up to be close to those of leading Thai companies.

Accordingly, the net profit is projected to grow by 7.6% QoQ to B3.1bn, bringing

about B11.8bn of FY2012 net profit (stabilizing YoY) which is lower than our

FY2012 forecast by only 1.7%.




2013 earnings result tends to quicken up outstandingly in every quarter

As DTAC would recognize the expense from paying the auction fee of 3G (2.1

GHz) license after starting the service in 2Q13 onward, the earnings result in

1Q13 is projected to grow continuously along with the seasonal benefits and

iPhone 5 sales. For 2Q13 (when 3G service with spectrum of 2.1 GHz would

begin), the non-voice service revenue and volume are projected to increase

constantly since 3G service would be a lot more efficient than present.

Furthermore, the company's cost is likely to decline due to the decrease of

service revenue sharing under 30% concession contract that has lowered to

around 10-15% (license cost included). This is under an assumption that DTAC

would gradually migrate its first-class customer database to the new 3G service

by 10% of this year's total subscribers. In 2013, the company's net profit is

projected to return to grow once again by 18% YoY to stand at B14bn.

Highest growth among peers. 27% upside from current share price

Despite yesterday's pressure toward the ICT sector from the appeal that has

been filed by the Ombudsman to consider the Administrative Court which had

rejected the appeal against 3G auction, we believe that the weakness of share

price is a good chance to accumulate. There's an unlikely possibility that the

Supreme Administrative Court would accept the appeal due to the following

reasons of the Administrative Court. 1) The NBTC isn't part of the government

sector; therefore, the Ombudsman possesses no rights to file an appeal. 2) The

Ombudsman isn't the one facing damage from 3G auction. Moreover, the

damage to the society is just a prediction and has yet to occur. In terms of 2013

profit tendency, it is projected to grow highest among mobile service

entrepreneurs. The current share price has 27.5% upside from the fair value.

Furthermore, there're low risks for DTAC in the worst case scenario since the fair

value that hasn't included 3G license still stands at a high level of B90.

Accordingly, we reiterate our recommendation of "BUY", choosing DTAC as a top

pick of the ICT sector. In addition, the company is projected to announce 4Q12

dividend yield payment at around B1.17/share or 1.4% after the announcement

of 4Q12 financial result.