Thaicom

Thaicom Plc (THCOM)

Core profit slightly below model
THCOM reported a Bt286m net profit for 4Q13, up 132% YoY but down 10% QoQ. Excluding a Bt170m FX loss and a one-time Bt104m penalty payout received for the delayed launch of Thaicom 6, core profit would be Bt352m, up 77% YoY but down 4% QoQ. The reported net earnings exceeded our estimate by 58%, due to recognition of the penalty payout. Core profit was 6% below our estimate because of lower other income than modeled. Gross profit beat our model by 5%.
Result highlights
The YoY core profit jump was due to the absence of recurring Mfone losses, greater GP for the IPSTAR satellite (related to lower IPSTAR costs) and declines in interest and tax expenses. The QoQ core earnings dip was driven by higher service costs related to the lease of the AsiaSat satellite as interim capacity and a jump in SG&A, which outweighed the effect of greater revenues. 
Conventional satellite revenue rose by 34% YoY and 9% QoQ, led by a full quarter of receipts for the interim capacity at the 78.5E slot (before Thaicom 6’s launch in Jan 2014). IPSTAR bandwidth sales rose by 18% YoY and 6% QoQ on greater usage in Australia, Thailand, Malaysia and India. Service costs rose 12% QoQ on the lease of the AsiaSat satellite as interim capacity. Telephone revenue increased 10% QoQ on LTC subscription and ARPU growth. 
The GP of conventional satellites dipped by 5% YoY and 2% QoQ, due to interim capacity leasing costs. The GP of IPSTAR jumped by 72% YoY and 21% QoQ, on lower IPSTAR costs. The GP of the telephone unit rose 15% QoQ on greater LTC revenue.
Outlook
We forecast FY14 top-line growth of 12%, which is close to THCOM’s 13-15% guidance, led by 11 months of revenue at Thaicom 6 (following its launch in Jan 2014), a full year of IPSTAR China receipts and a few months of receipts for Thaicom 7 (assuming that it launches in 3Q14). We expect the Thaicom 6’s transponder usage to increase to above 50% in 2H14 (presales now comprise 66% of its capacity). We preliminarily estimate a Bt280m 1Q14 core profit, up 74% YoY (thanks to the absence of Mfone losses starting mid Feb 2013) but down 20% QoQ (led by depreciation expenses for Thaicom 6 and OPEX tied to client traffic transference from the interim satellite to Thaicom 6).
What’s changed?
Our FY14 bottom-line forecast stands unchanged.
Recommendation
We have a BUY rating, premised on solid FY14 core earnings growth.