Samart I-Mobile

Samart I-Mobile Plc (SIM) 

 

Net and core profits in line with estimates  

SIM posted a Bt290m net profit for 2Q14, up by 13% YoY and 47% QoQ. Excluding two extra items—a Bt1m gain from the sale of an investment and an Bt8m FX gain—core profit would be Bt282m, down 1% YoY but up 44% QoQ. The 2Q14 net and core profits were in line with our estimates. Sales and GM were also in line with our model. 

Result highlights 

The flattish YoY core profit was attributable to a jump in SG&A, which offset the effect of higher gross profit. The QoQ core profit jump was due to a GM recovery following inventory clearance in 1Q14. Sales rose by 32% YoY and 7% QoQ, led by smart phones (855k, up by 123% YoY and 17% QoQ) and a higher mean sales price (Bt2,698/unit, up 10% YoY but down 8% QoQ). The firm sold 1.29m handset units in total, up by 28% YoY and 21% QoQ. SIM launched 17 new models in 2Q14, five of which were digital TV-enabled smart phones. GM recovered QoQ to 22.9% in 2Q14 from 18.8% in 1Q14. 

Handset sales totaled Bt3.18bn, up 36% YoY. Content revenue was Bt194m, down 20% YoY. Revenue from the MVNO business was Bt78m, up by 81% YoY and 10% QoQ. The GP of the handset business was Bt668m, up 8% YoY. The GP of the content unit was Bt46m, up 7% YoY. The GP of the MVNO unit was Bt29m, up by 123% YoY and 21% QoQ. Handset GM fell to 21% from 26.5% in 2Q13, but recovered from 17.6% in 1Q14. MVNO subscribership was 593k at end-June 2014, up 17% QoQ. 

Outlook

We preliminarily estimate a Bt270m net profit for 3Q14, up 29% YoY but down 4% QoQ, underpinned by smart phone sales (900k units, up by 121% YoY and 5% QoQ); we assume a flattish mean sales price (Bt2900/unit; up by 1% YoY and 8% QoQ). The firm will launch 10 new handsets in 3Q14, including two digital TV-enabled models. Digital TV coverage expansion during 2H14-1H15 will push up sales of digital TV-enabled smart phones.  

We expect blended GM of 23% for 3Q14, stable YoY and QoQ. The MVNO’s net loss for the quarter will be Bt5m, we assume, shallower by 50% YoY and 33% QoQ, due greater pre-paid subscribership.  

What’s changed? 

Our FY14 core earnings projection stands unchanged. 

Recommendation

We maintain a BUY rating, premised on a solid FY14 earnings profile. Our investment horizon shifts to YE15 with a new target price of Bt4.70.