Thaicom

Thaicom Plc (THCOM)

 

- 1Q15 profit grows from Thaicom 7  

 

THCOM announced B540m net profit in 1Q15 or the growth of 36%yoy (27%qoq), better than consensus, mainly from Fx gain of B74m. Excluding the extraordinary item, normalized profit was B466m, growing 35%yoy (4%qoq). Service revenue increased 8%yoy to B3.1bn, basically because Thaicom 7 started providing service since November 2014 at a capacity of 40% in 1Q15, while revenue from iPSTAR stayed flat yoy despite an increase in utilization rate from 54% in 1Q14 to 57% (THCOM was able to expand the rest 50% of its capacity in Malaysia (initially, THCOM allotted 6% of iPSTAR’s total capacity to Malaysia)). However, due to appreciation of Baht against Yen and Australian Dollar, revenue from customers in Japan and Australia lowered when exchanged to Baht. Cost of operation (cost of service plus selling and administrative expense) rose only 5%yoy (mostly Thaicom 7 cost), slower than the revenue growth. 

 

- Normalized profit to grow on sliding scale in the rest 3 quarters  

 

Normalized profit is projected to grow on a sliding scale in the rest of the year. Normalized profit in 2Q15-3Q15 would be boosted by increasing service capacity of Thaicom 7, from 40% in 1Q15 to 100% in 3Q15, while normalized profit in 4Q15 would come from selling of remaining capacity of other satellites, e.g. Thaicom 6 (the current capacity is 68%), which is targeting the market in Africa. At the same time, iPSTAR is penetrating the countries with low utilization rate, i.e. the Philippines, Indonesia, and India. Consequently, we estimate THCOM’s profit at B2.1bn or the growth of 30% in FY2015 and over 12% in FY2016, with Thaicom 7’s full-year operation at a full capacity as a major driver. The forecast is not yet included benefit from a new satellite, Thaicom 8 (providing broadcasting service), which will commence operation since 2Q16; its presales start in the middle of this year. 

 

- Negative factor from Govt policy depressing share price. Good entry point  

 

THCOM’s profit is promising both in the short and long term; the current share price is undervalued when compared with international peers (see page 3). However, the share price has not shown significant positive response as expected, possibly because of concern about an impact from a government’s policy on the satellite business. Yet, we believe the policy would not affect THCOM’s fundamental factors significantly. This is a good entry point.