Thaicom

What’s new? 

THCOM announced that Thaicom 7 successfully left the Earth and went into orbit at 120 degrees East on Sept 7, 2014. It was carried by a Space Exploration Technologies Corp Falcon 9 rocket, which launched from Cape Canaveral, Florida. Thaicom 7 was built by Space Systems/Loral of the US and is a JV between THCOM and Asia Satellite Telecommunications. 

The satellite has 28 C-band transponders in total, 14 of which are allocated to THCOM (14 to Asia Satellite Telecommunications) with a 15-year lifespan. Its footprint will cover South Asia, Southeast Asia, Australia and New Zealand. The total investment cost (including interest costs) for THCOM (14 transponders) is about US$171m, or Bt5.4bn (the satellite, the launcher, insurance and ground terminal equipment). Thaicom 7 will serve excess broadcasting and telecom demand, which cannot be filled by Thaicom 5 satellite (now fully utilized capacity) and Thaicom 6 (its Thai allocation is full).

Half of Thaicom 7’s capacity is pre-sold

Thaicom 7’s presales were 50% at the time of its launch and it claims to be in the final stages of signing presales contracts for the remaining 50%. We conservatively assume that presales will rise to 70-80% by YE14 and will reach 100% by 1Q15. Commercial services should start in mid Oct or early Nov 2014, following 1-2 months of orbital and technical tests. 

We expect 49% of Thaicom 7’s client portfolio to be broadcasting clients (the remainder will be broadband clients). We assume that four transponders used for telecoms workload will be moved from Thaicom 5 to Thaicom 7 in 4Q14. Two Thaicom 7 transponders will be reserved for clients for digital TV content feed.    

Thaicom 7’s incremental value of Bt2/share factored in 

We have factored Thaicom 7 into our model. Assuming a mean transponder utilization rate of 15% in 4Q14, a mean sales price of US$2m/transponder and a NM of 25% for Thaicom 7 (factoring in Bt85m/annum interest cost savings following debt refinancing through a Bt5bn debenture issue), we estimate Bt37m (1.9%) extra to FY14 net profit. Assuming the same NM and mean sales price, but average utilization rates of 70% in FY15 and 100% in FY16, we estimate incremental net profits of Bt159m for FY15 (7.1% of FY15 net profit) and Bt256m in FY16 (9.9% of FY16 net profit). As such, our YE15 DCF-derived target price rises by Bt2/share to Bt57. 

Our BUY rating stands, premised on strong FY14-15 core earnings growth and scope for upside from Thaicom 8 in FY16 and new IPSTAR markets, such as Indonesia and the Philippines.