Samart Telcoms

Samart Telecoms Plc (SAMTEL)
What’s new?
On Sept 27, 2013, Samart Comtech Co Ltd, a wholly-owned SAMTEL subsidiary, signed a Bt1.17bn contract with the Department of Land (DOL) to install “data entry and four computer systems” at the department’s Information Technology Center and 226 offices across 32 provinces. The project period is 360 days. The payment is divided into five installments.
Positive for SAMTEL
We had anticipated that SAMTEL would sign the contract in Oct (it won the tender on Sept 13, 2013), but hadn’t previously factored it into our forecast. The firm will recognize the following revenue from this project—Bt330m in 4Q13 then Bt230m per quarter, 1Q14 through 3Q14 and a final Bt80m payment in 4Q14.
FY13-14 net profit forecast and YE14 target price upgrades
We have now factored this project into our model. Based on the revenue recognition guidance noted above, we have revised up our top-line projections by 3.4% to Bt10bn for FY13 and by 7.5% to Bt11bn for FY14. Assuming a 7% net margin for the project, we have upgraded our net profit forecasts by 2.4% to Bt982m for this year and by 4.9% Bt1.15bn for next. Hence, our PEG-based YE14 target price (Gordon Growth Model) rises by Bt1/share to Bt27.50.
Another three big-ticket projects lined up for signing in 4Q13
We expect SAMTEL to sign the following state agency contracts, Oct-Nov: 1) the AOT’s Bt2.5-3bn five-year Advanced Passenger Processing Service (APPS) project, 2) the AOT’s Bt700-800m 10-year Common User Terminal (CUTE) Outsource at Phuket Airport and 3) the Royal Thai Police’s Bt600m project. We have not yet factored these three expected contracts into our model. We preliminarily estimate Bt2-3/share of incremental value from them.  
Expect YE13 project backlog of Bt9bn (excl. TOT 3G Phase 2)  
The project backlog at end-June 2013 was Bt8bn. SAMTEL signed Bt2-3bn in new contracts in 3Q13 (we don’t have the exact figure yet) and should sign another Bt7-8bn in 4Q13. Ongoing income recognition from existing projects will burn through much of the backlog from end-June, but we expect it to be at least Bt9bn at YE13.
We assume that SAMTEL will sign the Bt3bn APPS project in 4Q13, but we think that the TOT’s 3G Phase 2 project is more likely to be signed in 1H14. The 3G Phase 2 contract will probably be changed from a low-margin two-year turnkey project to a high-margin 10-year outsource deal that includes ongoing post-buildout maintenance work.