Advanced Info Service

Advanced Info Service Plc (ADVANC)

- PDRC urges to boycott and sell ADVANC
Yesterday, ADVANC was sold fiercely that the price dropped by 1.4% from the
morning closing price. Suthep Thaugsuban, the PDRC leader, declared to stop
at nothing to attack government-related companies and urged people to
boycott the companies (e.g. SC and ADVANC) and sell the stocks.
- Higher cost for service cancellation. Limited pressure
We project that the boycott and cancellation on ADVANC service would have a
negative sentiment for only a short term. There would be limited impact on
ADVANC's profit and overall subscriber volume because the customers have to
carry cost of boycotting and cancelling ADVANC service: 1) Mobile number
portability (MNP) costs B29/time/number and a couple days of operation
(during the operation, users are not able to use any service). Moreover, each
mobile network operator is capable of transferring at the capacity of 60,000
subscribers/day. They are currently focusing on transferring from 2G network to
new 3G network with almost all of their capacity. Thus, it would take longer
than usual for users to switch networks. 2) Cancelling the current service to use
new number would cause difficulty on contacting. Aside from the cost, the new
network might be inferior to ADVANC because ADVANC has been working hard
on developing 3G network since the acquisition of the 2.1 GHz network license
in 2012.
- Share price to fall due to negative sentiment, but good entry point
Under our study, every 1% decline in subscriber volume (420,000 subscribers)
from our forecast (4.2 million) would reduce ADVANC's net profit by no more
than 2%. As a result of limited impact from service cancellation, we maintain
our forecast. ADVANC's FY2014 net profit is expected to grow by 10%yoy. We
derive ADVANC's fair value at B270, implying 24% upside with over 6%p.a
dividend yield. We reiterate "BUY". The price has been declining due to the
negative sentiment, so this would be a good entry point.