SIM posted a Bt152m net profit for 4Q13, up 79% YoY but down 31% QoQ. Stripping out extra items—a Bt22m FX gain and net extra expenses of Bt59m (bad debt provisions and a loss on an asset sale)—core profit would be Bt189m, up 62% YoY but down 10% QoQ. The reported net profit was in line with our estimate. Core earnings exceeded our number by 32%, thanks to fatter GM than assumed and recognition of a tax credit (we had assumed tax expenses in 4Q13). GM was 24.1%, significantly above our estimate of 15%.
The YoY core profit jump was attributable to heavier smart phone sales volume and a higher mean sales price. The modest QoQ decline was due to a surge in SG&A expenses. Blended GM was 24.1%, up from 21.6% in 4Q12 and 22.8% in 3Q13. The firm sold 1m units of handsets in 4Q13, of which 558k were smart phones, up by 64% YoY and 37% QoQ. The average sales price was Bt2,629, up 18% YoY (led by a higher proportion of smart phones in the sales mix) but down 9% QoQ (as a result of price-cutting to clear inventory).
Handset sales were Bt2.2bn in 4Q13, up 12% YoY. Content revenue was Bt237m, down 11% YoY. Revenue from the MVNO business was Bt70m, up by 218% YoY and 43% QoQ. The gross profit of the handset business was Bt607m, up 41% YoY. The GP of the content unit was Bt39m, down 40% YoY. The GP of the MVNO unit was B13m, a YoY turnaround from a Bt3m gross loss in 4Q12. Domestic handset GM jumped to 27.6% from 21.9% in 4Q12. The GM of the content business dropped to 16.5% in 4Q13 from 24.5% in 4Q12. MVNO subscribership was 400k at YE13, up 14% QoQ.
We preliminarily estimate a Bt200m core profit for 1Q14, up by 20% YoY and 6% QoQ, led by greater smart phone sales volume and a higher mean price. Smart phone sales volume of 600k units is expected for the quarter (up by 57% YoY and 8% QoQ). GM should be about 25%, supported by a higher average sales price (Bt2,800, up by 10% YoY and 7% QoQ). SIM will launch nine i-mobile smart phone models in 1Q14. Despite concerns that the consumption slowdown might squeeze demand for new handsets in 1H14, we forecast a good core profit for 1Q14, premised on greater smart phone sales in the provinces in tandem with the nationwide rollout of 3G networks.