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Total Access Communication

Total Access Communication Plc (DTAC)

- 1Q14 net profit strong. Low income but good control on expense

1Q14 net profit was reported at B3.3bn, leaping 78%qoq. B35m extraordinary

profit from Fx gain was booked in 1Q14, reversing from B1.2bn extraordinary

expense in 4Q13. Excluding extraordinary items, 1Q14 normalized profit was

B3.27bn, growing 8.4%qoq (projected to stay flat). Gross profit margin

improved from 31.3% in 4Q13 to 34.6% in 1Q14 (better than expected). Though

service revenue fell by 1.5%qoq due to weak purchasing power and fierce

competition, cost of service (excluding IC) dropped by 3%qoq. Thanks to good

control on operating cost, expenses on network decreased by 10%qoq. Also, the

number of subscribers migrated from 2G network (30% revenue sharing cost) to

3G network (5.25% revenue sharing cost) grew from 4Q13 by 3.9 million to 15.9

million in 1Q14 (making up 59% of total subscribers). Thus, ratio of revenue

sharing to service income dropped from 26% to 25.6%. Moreover, selling and

administrative cost dropped 12%qoq in 1Q14, after advertisement season in

4Q13 passed.

- Low profit in 2Q14, but to rebound in 3Q14-4Q14

Revenue sharing cost is likely to drop further throughout 2014, benefiting DTAC.

The number of 3G network subscribers is projected to increase and reach 21

million at end-2014 (making up 73% of total subscribers). However, due to low

season, 2Q14 service revenue is expected to drop qoq and negate the positive

factor, so 2Q14 net profit would drop from 1Q14. Then, net profit is expected to

rebound in 3Q14 and make the year’s highest in 4Q14, which is a high season.

1Q14 net profit made up 24.7% of FY2014 earnings forecast. We maintain the

forecast, projecting net profit to grow by 25% in 2014.

- Strong growth already reflected in share price. Hold

DTAC’s share price has been increasing, currently having 2.1% downside.

FY2014 dividend yield is possibly above 5.0%. We reiterate to hold for dividend.

DTAC announced 1Q14 dividend at B1.42 (or 1.1% dividend yield). XD date is 12

May 2014.


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