Total Access Communication
Growth returns since Q4 2012 Upgrade to "BUY"
Total Access Communication (DTAC)
Q3 2012 norm profit stabilizes from Q2 2012 due to decreased marketing expense
DTAC’s net profit in Q3 2012 stands at B2.88bn or 6.3% YoY decrease due to the impact from increased revenue sharing to CAT from 25% to 30% (affective since 16 September 2011). However, Q3 2012 net profit has stabilized close to one in Q2 2012 due to the subscriber volume from Q2 2012 that has increased by 257,000 units to 23.9 millions units. For the average revenue
per number per user (ARPU), it still has stabilized at B217 (the growth of non-voice service can help compensate the decreased revenue from voice service). Accordingly, the service revenue has increased by 1.7% QoQ; however, it is offset by the revenue from mobile sales that has dropped by 28.4% QoQ because customers have decelerated on buying to wait for the arrival of iPhone 5 in late-2012. Nevertheless, the company is compensated with 1) the gross profit margin that has increased from 30.78% in Q2 2012 to 31% due to the shrinkage of phone sales revenue (with much lower gross profit margin) and 2) the marketing expense that has declined from the previous quarter by B108m.
Growth evident once again since Q4 2012, sustaining FY2012 profit form prior year
The company’s profit in Q4 2012 is projected to thrive YoY and QoQ once again because DTAC has already paid revenue sharing at 30% to CAT for full quarter since Q4 2011. Combined with benefits from high season, new iPhone arrival in the late of year (that might boost the number of new additions and ARPU, also raising revenue from phone sales), we believe that the company’s
FY2012 profit would stabilize from 2011. Although 9M12 profit has fallen by 8.4% from the same period of last year, 2013 net profit is projected to return to grow by 18% YoY. Accordingly, DTAC would be the most outstanding among peers once again due to the growth of non-voice service revenue and stabilization of revenue sharing from concession at 30%. In 2013, new customer base is projected to come from 3G service with spectrum of 2.1 GHz which is much cheaper the current concession because only 6% of revenue sharing would be paid to the NBTC. Combined with B13.5bn of auction price for 3G license (that would be paid by B900m/year for 15 years), the total revenue sharing is projected to stand at 10-12% in total. In addition,DTAC’s first class customers would be transferred from the concession to 3G service with 2.1 GHz spectrum in 2013 under the new license.Furthermore, the company’s effective cost control from a network swap will be apparent when the swap is complete.
Return to most outstanding growth among peers in 2013.
Upgrade to “BUY”
Investors should keep an eye closely on the progress of DTAC’s service under the new license since it’s the turning point toward growth at a high level once again in 2013. We now apply 2013 fair value, using DCF, at B110 with 22.9% upside from the current share price. In addition, DTAC has a policy to pay dividend not less than 80% from the net profit in every quarter, considered
over 5% of dividend per year. In 3Q12, dividend yield was announced at B1.13/share which is considered 1.2% dividend yield (going XD on 31 October 2012). Accordingly, we upgrade our recommendation from “HOLD” to “BUY”.
