Total Access Communication

Total Access Communication Plc (DTAC)

Investment thesis: DTAC remains our top Telecoms pick because it has the greatest scope for upside from winning a 3G license. Despite the recent share price rally, we expect its share price to be bid up further over the next six months or so, through to 3G auctioning in 4Q12. In light of our more bullish 1Q12 earnings estimate and our upgraded FY12 revenue projection, we have revised up our FY12 profit forecast by 8% and our YE12 target price by 10% (to Bt115). Our BUY rating stands, premised on: 1) the greatest scope for upside from 3G, 2) an FY12 bottom-line surprise and 3) a good yield of 6%.  
More bullish 1Q12 estimate: We estimate a Bt3.3bn net profit for 1Q12, down 1% YoY but up 38% QoQ. This new estimate is more bullish than our earlier number of Bt2.9bn, due to s higher 1Q12 revenue expectation. We estimate core profit at B3.3bn, up 2% YoY and 22% QoQ. The marginal YoY core profit rise is because of greater revenue and a 7% headline corporate tax cut to 23%, which more than offset the effect of revenue-sharing obligations increasing to 30% (effective Sept 16, 2011). The QoQ core profit jump is thanks to a higher top-line and flat OPEX.
Network upgrade to be completed by 4Q12: After three network disruptions, DTAC announced the suspension of its network upgrade early this year. The firm has since resumed the upgrade, which is more than 50% complete. The network upgrade in Bangkok should be finished by the end of 3Q12 and in the provinces by early 4Q12.
3G on 850MHz roll-out: The firm plans to have 5,000 3G-850MHz base stations in place by YE12, up from 2,000 in March. The new roll-out plan is more aggressive than the previous guidance. Half of DTAC’s total Bt8-9bn CAPEX budget for this year is allocated to its 3G on 850MHz network.
3G visibility: On March 21, 2012 the NBTC approved all three master plans (frequency, telecom and broadcasting), which are expected to be published in the Royal Gazette at the end of March or in early April. We expect license auctioning for 2.1GHz bandwidth to start in Sept or Oct 2012 and the awarding of licenses in 4Q12.   
Outlook  
More bullish 1Q12 estimate: We estimate a Bt3.3bn net profit for 1Q12, down 1% YoY but up a robust 38% QoQ. Our new net earnings projection is more bullish than our earlier number of Bt2.9bn, due to a greater 1Q12 revenue expectation. Stripping out extra items—FX gain and a Bt306m deferred tax provision (ahead of the corporate income tax cut to 23%) in 4Q11—core profit would have risen by 2% YoY and 22% QoQ. The marginal YoY core profit rise is because of a 14% YoY top-line expansion and a 7% headline corporate tax cut to 23%, which more than offset the effect of revenue-sharing obligations increasing to 30% (effective Sept 16, 2011). The strong expected QoQ core profit jump is due to higher revenue and flat OPEX. The 4Q11 top-line was a bit weaker than normal, presumably because of the flooding.