Thaicom

Thaicom Plc (THCOM)

Core profit exceeded model
THCOM reported a Bt190m net profit for 2Q13, up 66% YoY but down 43% QoQ. Stripping out a Bt173m FX loss in 2Q13, an FX gain and the reversal of an impairment for Mfone in 1Q13, the 2Q13 core profit would be Bt363m, up by 121% YoY and 126% QoQ. Net profit exceeded our estimate by 178%, while the core number overshot our model by 46%, thanks to lower tax expenses than modeled. Sales were 4% below our assumption. Gross profit (GP) was 3% below our model.  
Result highlights
The YoY core profit jump was attributable to no Mfone recurring losses, greater revenues at Thaicom 5, IPSTAR and Lao Telecom (LTC), lower IPSTAR OPEX and a decline in interest expenses following a Bt3.3bn debenture repayment in Nov 2012. The QoQ jump was due to a full quarter of no Mfone recurring losses (there was a 1.5-month recurring loss in 1Q13 up to Feb 15) and a plunge in SG&A because of no additional expenses for Mfone, lower staff costs and cost control at LTC and the satellite TV business. The top-line declined by 7% YoY and 1% QoQ, due to no Mfone revenue. After-tax profit rose by 150% YoY and 219% QoQ.
Thaicom 5’s revenue inched up 5% YoY with the addition of 48 new TV channels (465 channels at end-June 2012) and greater value-added service revenues. IPSTAR bandwidth income rose 4% YoY, led by 50% greater usage by the TOT, effective April 2013, and increased usage by both the Australian govt’s NBN and the MEASAT of Malaysia. LTC’s revenue rose 12% YoY on greater subscriber additions and blended ARPU. Internet revenue dropped by 67% YoY and 40% QoQ on fiercer price competition among satellite-platformed operators.
The gross profit of Thaicom 5 edged up 6% YoY. The GP of IPSTAR jumped 39% YoY, led by lower equipment costs. The Internet business posted a Bt1m gross loss (a Bt10m GP in 2Q12), due to price-cutting.
Outlook
We expect 2H13 earnings to rise both YoY and HoH, led by new revenue streams from bandwidth sales to Synertone (IPSTAR’s new Chinese client), effective Sept or October 2013, the interim satellite at 78.5E, effective August or Sept 2013, and Thaicom 6, effective October 2013. We also expect greater IPSTAR usage by clients in Indonesia and the Philippines in 2H13. If THCOM were to close a deal with an Indian telco in 2H13, we might expect higher Indian revenue in FY14. 
What’s changed?
We maintain our FY13 net profit forecast unchanged.
Recommendation
Our BUY rating stands, premised on a big earnings jump in FY13.