Shin Corporation

Shin Corporation Plc (INTUCH)

Lower than modeled
INTUCH posted a Bt3.48bn net profit for 4Q13, up by 5% YoY and 3% QoQ. Excluding extra items—an FX loss and the Bt104m penalty payout THCOM received for the delayed launch of Thaicom 6—core earnings would be Bt3.65bn, up by 2% YoY and 2% QoQ. The net and core profits were in line with our estimates. ADVANC’s core earnings were 3% above our estimate, due to lower OPEX (network OPEX, regulatory and marketing expenses) than assumed. THCOM’s core profit was 6% below our model, due to lower other income than assumed. INTUCH announced a Bt2.16 DPS for Jan-March 2014 operations, a 3% yield.
Result highlights
The modest YoY core profit rise was led by ADVANC—up by 3% YoY and 7% QoQ. ADVANC's YoY core earnings increase was driven by lower regulatory costs, which outweighed the effect of a revenue decline and increases in 2.1GHz license-related OPEX. Its service revenue (excl. IC) dipped 1% YoY (flat QoQ), due to lower voice income (down by 9% YoY and 3% QoQ). Nonvoice income rose by 19% YoY and 4% QoQ (see details in ADVANC’s 4Q13 results).
THCOM’s 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. 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)—see details in THCOM’s 4Q13 results.
Outlook
We estimate a 6% YoY rise in INTUCH’s FY14 top-line, in line with the firm’s guidance of 5-7%, led by greater THCOM revenue (strong demand for satellite transponder capacity).
Our model indicates a Bt3.8bn 1Q14 core profit for INTUCH, down 6% YoY (but up 4% QoQ), as we expect ADVANC’s core earnings to decline 8% YoY, which would outweigh the effect of a 74% YoY jump in THCOM’s core profit. For ADVANC, we assume a 1-2% YoY dip in 1Q14 service revenue (excl. IC), due to declining voice income. But nonvoice revenue expansion should accelerate, driven by new bundled handset-data bucket plans.
What’s changed?
Our NAV-based YE14 target price inches up 1% to Bt100 to factor in the 1% upgrade to our ADVANC YE14 target price (to Bt248).
Recommendation
We have a BUY rating on INTUCH, premised on a 6% dividend yield.