Thaicom

Thaicom Plc (THCOM)

Investment thesis
We expect THCOM to post strong core profit growth for 4Q12, driven by Thaicom 5 and IPSTAR receipts and lower interest expenses. Now is a good time to accumulate the stock ahead of a surge in earnings in FY13—no more losses from Mfone after 1Q13, higher revenue from China and India in 2H13 and the launch of Thaicom 6 this year. The stock looks cheap—an FY13 EV/EBITDA ratio of 6.8x against a regional mean of 9x.

Solid core profit growth expected for 4Q12
We estimate a Bt117m net profit for 4Q12, against net losses of Bt315m for 4Q11 and Bt107m for 3Q12. Stripping out FX and Bt254m in extra expenses (mainly a 3Q12 provision for Mfone), core earnings would be Bt105m, up by 24% YoY and 17% QoQ. We expect only small Mfone-related expenses to be added to the SG&A row for 4Q12.
The expected solid QoQ core profit rise is due to lower SG&A and interest expenses. SG&A in 3Q12 was abnormally high, due to a Bt27m special payout for employee benefits and Bt42m in expenses for Mfone. The firm repaid a Bt3.3bn debenture with cash on Nov 6, 2012—hence, interest expenses in 4Q12 should have fallen. The anticipated YoY core profit rise is attributable to greater revenue (underpinned by Thaicom 5 and IPSTAR), good OPEX control and lower interest expenses.

Greater satellite revenue (both IPSTAR and conventional)
We estimate 4Q12 revenue at Bt1.95bn, up by 5% YoY and 2% QoQ, led by Thaicom 5—up by 16% YoY and 1% QoQ—and IPSTAR—up by 3% YoY and 6% QoQ. Thaicom 5’s jump in receipts is due to 70-75 new TV channels added in FY12 (to 472-477 channels at YE12).
The usage ramp-ups of the Australian government’s National Broadband Network (NBN) and MEASAT of Malaysia and revenue recognition of the remaining 20% of bandwidth allocated to Japan underpin 4Q12 IPSTAR bandwidth revenue (one of IPSTAR’s clients in Japan will start sub-leasing backhaul to a WiMAX operator called UQ Communications in 1Q13). With regard to the telephone business, we expect revenue will post a drop of 12% YoY and 2% QoQ, due to Mfone.
The Laos operations should report a slight QoQ improvement Revenue from DTV, THCOM’s satellite TV-platformed business, will post a fall on lower ARPU for new subs.