Shin Corporation

What’s new? On Dec 26, the INTUCH board approved an interim DPS of Bt2.34 (Bt7.5bn in total) for the period starting August 11, 2011 to December 25, 2011. The interim dividend will be paid from the one-off Bt7.49bn gain (net of expenses) from the 2% sale of its investment in Advanced Info Service Plc (ADVANC) to Singtel Strategic Investment Pte Ltd (61m shares at Bt130 apiece on Dec 23, 2011). The XD is Jan 5, 2012 and the payment date is Jan 23, 2012. 
Analysis: The special dividend payout is positive and was anticipated. The DPS of Bt2.34 is in line with the consensus estimate of Bt2.00-2.48/share, but above our earlier estimate of Bt1.70/share (we had assumed an ADVANC sales price of Bt125/share and a 70% dividend payout, but the ADVANC sales price was actually Bt130/share and the dividend payout ratio was 100% of INTUCH’s gain after deducting expenses). The special dividend of Bt2.34/share translates into a 5.5% yield. Including the recurring Bt3.16 DPS paid during FY11, the total FY11 dividend amounts to Bt5.50/share—a 12.9% yield.   
In the absence of a special dividend in FY12, we estimate a DPS of Bt3.86, a 9% yield, assuming a 100% dividend payout ratio from consolidated net profit. Forecast INTUCH core profit growth of 16% will be driven by earnings expansion of 12% for ADVANC and a THCOM bottom-line jump of 873%. ADVANC’s FY12 profit growth will be led by both data and handset revenue increases. THCOM’s FY12 operational turnaround will be driven by the divestment of Mfone and a jump in IPSTAR income with full-year recognition of receipts from MEASAT of Malaysia and NBN of Australia and the sale of remaining IPSTAR bandwidth allocated to Japan to two Japanese telcos. 
Action: We have revised down our DCF-based YE12 NAV target price (including the 3G license) by 4% (from Bt61.80 to Bt59.60) to factor in lower YE12 cash on-hand, due to a bigger-than-expected special dividend. There is a 39% upside to our DCF-based NAV (including 3G license). Based on yesterday’s market prices for ADVANC (Bt142.50) and THCOM (Bt10.40), INTUCH’s market price-based NAV is Bt50 (including a 10% discount for being a holding company). We think INTUCH is a good indirect 3G investment play for FY12—the direct 3G play, ADVANC, is now nearing full value.