Jasmine International

Jasmine International Plc (JAS)
- Subscribers increase continuously. 9.6%qoq profit growth projected in 3Q13
As the current internet penetration rate in Thailand remains very low at only 30% of
the population (compared with over 50% in other countries) and a demand for high
speed internet as a home-wifi is growing due to increasing popularity of smart
phones, JAS’s subscriber base has been enlarging continuously. In addition, the
company has improved the service provision efficiency to cover a wider range of
areas by increasing new access nodes from 300 nodes/quarter to 500 nodes/quarter
in 3Q13 (1 node can support 128 subscribers), which would help increase the
subscriber base in 3Q13 to the target of 60,000 units. At the same time, the
company has kept the package promotion of B599/month payment for 12MB/s
speed internet to attract clients, so ARPU would stay flat qoq. However, revenue
base from the interest business would still grow 4.1%qoq, while revenue base from
other businesses would stabilize qoq, so overall revenue in 3Q13 would increase
2.5%qoq to B2.77bn. Operating profit margin is estimated at 35%, close to that of
2Q13 as a result of depreciation and personnel expense from increasing service
areas. Nevertheless, the stronger revenue base would make the normalized profit in
3Q13 grow 4.0%qoq to B776m. The net profit would show better growth of
8.4%qoq because in 2Q13 JAS realized a Fx loss of B30m, while there is not such
item in 3Q13.
- Continuous profit growth foreseen in 4Q13 and next year
JAS’s profit base in 4Q13 would continue growing from 3Q13 following increasing
subscriber volume on rising demands for a high-speed internet as a home-wifi for
smart phone. Consequently, net profit would grow 53%yoy in 2013 and 26% in
2014 as we have projected. However, our forecast has still not included a positive
factor from a plan to establish an infrastructure fund (IFF), until there is a progress
after it is approved from the SEC. Additional information here is that JAS will be able
to establish the fund by 1Q14 at the latest. Under an assumption for the fund selling
price at the minimum rate of B50bn, we project JAS to recognize extraordinary
profit after tax and cash of around B21bn and B28bn, respectively. The cash will be
divided into three parts: 1) B12bn for investing in nationwide terminal fiber network
(three years; B4bn each), 2) some for paying as special dividend or for treasury
stock project, and 3) the rest for new investment in the future.
- 2014 fair value before including IFF is B11.5. Buy
Although the current share price has been rising until getting close to FY2013 fair
value at B9.8, we tend to change to use FY2014 fair value at B11.5 (after 3Q12
earnings declaration), which implies 20% upside. Moreover, our fair value has still
not included additional value from the IFF establishment and the plan to use money
from the fund establishment to invest for the network expansion, which would help
increase JAS’s subscriber base in the next three years, from 1.4 million units at
present to three million (versus the previous target of two million); 50% of which
will be ADSL subscribers and the other 50% will be FTTh. We will not include the
project in our forecast until JAS is approved by the SEC to establish the fund.
Preliminarily, the value added from the project is estimated at not lower than B2.7.
Reiterate BUY