Samart I-Mobile

Samart I-Mobile Plc (SIM)

Investment thesis
SIM’s share price dive makes it worth accumulating again. Furthermore, its MVNO business should turn around in FY14. We have rolled over our investment horizon to YE14 and arrived at a new target price of Bt4.85 (an implied PER of 18.7x). The stock currently trades at an FY14 PER of 12.9x. BUY!
A surge in MVNO subscribership in 3Q13
SIM’s Mobile Virtual Network Operator (MVNO) subscribership jumped from 200k at end-June to 300k in Sept 2013. The average daily top-up value for MVNO subscribers rose from Bt0.4m in June to Bt0.6m in Sept 2013 (up 50% QoQ). We estimate YE13 MVNO cumulative subscribership at 450k (up 125% YoY) and FY13 blended ARPU at Bt95 (up 5% YoY). Our YE13 subscriber target is less aggressive than management’s target of 600k.
MVNO turnaround expected in FY14
SIM will sign a new MVNO contract with TOT in 4Q13, which will boost subscribership in 4Q13-FY14. Assuming YE14 cumulative MVNO subscribers of 1m (up 122% YoY) and blended ARPU of Bt120 (up 26% YoY), the new 54:46 revenue-sharing scheme (SIM:TOT) and a 10% net margin for the MVNO business, we estimate Bt562m in MVNO revenue (net of revenue share) next year and a Bt56m net profit—a bottom-line turnaround. We assume MVNO break-even at 600k subscribers and blended ARPU of Bt120/mth/sub.
Smart phone sales volume jumped in 3Q13
We now estimate a Bt220m net profit for 3Q13, up 523% YoY (thanks to higher smart phone sales and GM) but down 14% QoQ (due to rainy season and an FX loss). Stripping out the FX loss, the 3Q13 core profit would be Bt246m, up 1,003% YoY but down 13% QoQ. SIM will sell a total of 820k handset units in 3Q13, down by 19% YoY (due to the drop in feature phone sales) and 19% QoQ (seasonality). Of the total, 405k units will be smart phones, up by 135% YoY and 5% QoQ. Blended GM will jump YoY—27-28% against 17.5% in 3Q12, thanks to more smart phones in the sales mix. We estimate a 3Q13 blended average sales price of Bt2,518—up 59% YoY and 3% QoQ.
SAMART group bought a 9% stake in MLINK
SAMART group, comprising SIM, Vilailuck Holding Co Ltd and Mr Watchai Vilailuck, recently bought a combined 9% stake in MLINK from members of the Shinawatra family. We foresee bigger benefits to both firms, such as future OPEX reduction, pooled or shared distribution channels and shared marketing resources for MVNO subscribership expansion.