Samart I-Mobile

Samart I-Mobile Plc

2014 revenue expected to expand 30%. After reaching 2013 sales target of Bt10bn,
SIM expects revenue growth of 30%YoY to reach Bt13bn in 2014, largely from handset
sales, 90% of revenue, which are targeted to grow to 4.0mn units in 2014 from 3.76mn
in 2013. We expect a 2014-2017 revenue CAGR of at least 20%. The continued switch by
consumers to 3G should keep mobile phone and accessories vendors growing despite a
slowdown in private consumption. Backing SIM’s success is its own brand, which gives a
high gross margin of ~25%. However, competition may heat up if mobile operators
introduce their own brands.
High unit sales and average selling price (ASP). We estimate SIM’s unit sales will
reach 4.0mn in 2014, after achieving 3.76mn in 2013. 2013 average selling price was
Bt2,615, 38% below the market average of Bt4,206. ASP in 2014 is expected to increase
7% from 2013’s to Bt2,800. The company is working to meet the challenge of greater
competition by moving its band of products into the higher end, which will still give it
a high margin.
Content business through digital TV in 2014. The SAMART group plans to produce
set-top boxes for digital TV, using SIM to distribute them. The launch of digital TV has
opened up a new era for the content business and sale of set-top boxes. Net margin
from distribution of set-top boxes is expected at just 3-4% initially; price is estimated
at Bt1,155. Volume should surge in 2015 when stations are broadcasting fully. SIM may
book Bt30-50mn from set-top box sales in 2014.
Cut 2013 forecast, maintain target price at Bt4.80. We reduce our 2013 net profit
forecast 5% to Bt850mn from Bt901mn, with net profit poorer in 4Q13 than in 2Q13
and 3Q13 because of losses from the MVNO business of ~Bt70mn. For the year we
expect the MVNO business to contribute losses of less than Bt10mn. We estimate 4Q13
core profit at Bt195mn, -11% QoQ, but +143%YoY. We expect core profit to grow by 24%
to Bt1.06bn in 2014.
Recommend Buy on good days ahead. SIM continues to enjoy acceptance of its
brand, with sales and profit soaring; however, 4Q13 will disappoint and we thus cut
earnings. In 2014, SIM will continue to do well with its own brand, with ASP rising.
Margin is high at ~25% compared to the 13-15% for international brands. As
subscribers move to 3G from 2G, we look for strong sales and profit through 2014. We
value SIM by comparing it with JMART and use a 2014 PER of 20x. From this we derive a
target price of Bt4.80. We still rate it a BUY