Shin Corporation

Shin Corporation Plc (INTUCH)
 

Core earnings exceeded model: The reported 4Q11 net profit fell short of our estimate by 9% because the deferred tax provision for the group was bigger than we assumed. However, core earnings beat our model by 20% on higher than expected core earnings for ADVANC and THCOM. The firm announced a DPS of Bt1.58 for Jan-March 2012 operations, a 3% yield.
Results highlights: INTUCH posted a Bt8.78bn net profit for 4Q11, up by 265% YoY and 247% QoQ. There were two major extra items—a Bt7.26bn gain from selling a 2% stake in ADVANC to Singtel and a Bt1.36bn deferred tax provision. Stripping out extra items—FX, an impairment for ITV and the two items noted above—core profit rose by 20% YoY and 14% QoQ. The YoY core earnings growth was due to: 1) greater equity income from ADVANC, 2) a higher THCOM core profit.
ADVANC’s YoY core profit rise was led by voice revenue (up 9% YoY) and nonvoice (up 34% YoY), which more than offset the effect of higher OPEX. Other OPEX—bad debt and marketing expenses—jumped significantly YoY. THCOM’s YoY core earnings jump was underpinned by stronger conventional satellite revenue and greater IPSTAR service income with the first receipts from NBN and MEASAT. The telephone unit and DTV sales (under the Internet unit) were the major drags. On a QoQ basis, the telephone business posted a modest improvement.
Outlook: We forecast a strong YoY rise in earnings for INTUCH in 1Q12, led by ADVANC—lower corporate income tax, sustained nonvoice revenue growth (up 25-30%) and a full quarter of IPhone 4S sales. Moreover, we expect THCOM to post YoY core profit expansion in 1Q12, driven by IPSTAR revenues and a shallower net loss for the telephone unit. .
What’s changed? Due to our 6% FY12 profit forecast upgrade for ADVANC, which meant we also upped our ADVANC YE12 target price by 7% to Bt180, we have increased our NAV-based YE12 target price for INTUCH by 7% to Bt64.
Recommendation: Our BUY rating stands.