Jasmine International

Jasmine International Plc (JAS)

- 2Q13 norm profit grows continuously 2.8%qoq due to increasing subscribers
JAS's 2Q13 net profit was reported at B715m, rising 56.3%yoy but falling
7.7%qoq partially due to Fx loss, reversing from B50m profit in 1Q13 to B30m
loss. Norm profit grew 2.8%qoq to B745m, thanking to 3.7%qoq growth in
subscribers to 47,000 units, as JAS’s network quality is superior to rivals like True
Online and TOT, which are partially connected to former telephone network.
Moreover, internet user base has been expanding continuously. In 2Q13, the
latest internet technology, FTTH (Fiber to the Home - transferring data via fiber
wire with the highest speed of over 100x compared to copper-wired ADSL) was
used by approximately 5,000 subscribers (0.4% of total subscribers). After JAS
had opened the service with B1,200 high-speed 30 MB package, doubling price
from former ADSL service. Thus, 2Q13 ARPU rose 0.3%qoq, boosting total income
by 2.5%qoq to B2.7bn, whereas cost of service and selling and administrative
expense to income were still close to 1Q13.
- To grow continuously without worry about new rival: CTH
We predict that JAS's profit would grow continuously in 2H13 due to superior
network quality and popularity of smartphone and tablets, which boosts
installation of high-internet service as home Wi-Fi hotspot throughout Thailand.
These are likely to boost new subscriber growth to 50,000 per quarter as
targeted. At least 10%, or 5,000 new subscribers per quarter are projected to use
FTTH service (currently 15,000 subscribers are waiting for installation), so ARPU
is likely to rise continuously. JAS's income base is projected to increase every
quarter. Growth rate of operational cost would be implicitly lower than profit
growth, as 65% of the cost is fixed e.g. amortization and employee expenses. We
maintain our 2013 net profit forecast at B3.2bn, growing 52.9%, and likely to
grow 26% next year. CTH that also uses the latest technology of FTTH to steal
market share is not a threat, as CTH focuses on Pay TV business while internet
business is minor business benefited from FTTH networking. Moreover, CTH's
FTTH network coverage has not spread nationwide, so satellite platform is needed
to expand Pay TV subscriber base. Thus, CTH is more likely to depend on Pay TV
as the main business along with internet service, like TRUE's strategy.
- Blissful growth, FV implies 19.5% upside, reiterate "BUY"
Growth is likely to be blissful next 2-3 years; DCF-based (13% WACC, 2.0%
terminal growth) fair value implies 19.5% upside, so we reiterate "BUY"