Intuch Holding
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Grow from ADVANC and THCOM Rec. : BUY BUY
Intuch Holding Plc (INTUCH)
- ADVANC, THCOM boost 1Q15 profit
INTUCH's profit grew significantly in 1Q15 mainly from its subsidiaries: 1) Shared profit from ADVANC (holding 40.45% stake) rose by 8.3%qoq. SG&A expense decreased 11.1%qoq from high base in a marketing season in 4Q14, and service revenue (excluding IC) rose 1%qoq and 4.6%yoy because of well-received 3G network, but cost of service (excluding IC) increased 3.0%qoq from 3G network improvement cost. 2) THCOM's (holding 41.14% stake, consolidating financial statement) normalized profit grew by 4%qoq since SG&A dropped by 7.6%qoq. Meanwhile, gross profit stayed flat from 1Q14 although income from Thaicom 7 was booked for the first full quarter (starting from November 2014); the occupancy rate was at the breakeven point of only 40%. Overall, INTUCH's 1Q15 normalized profit was B4bn, growing 7%qoq. Including B75m Fx gain, 1Q15 net profit was B4.1bn, rising 12.4%qoq and 6.7%yoy.
- Normalized profit to rebound yoy in 2Q15-4Q15. FY2015 profit to grow 16%
INTUCH's 2Q15-3Q15 profit is projected to weaken from 1Q15 but rebound yoy. Shared profit from ADVANC is expected to drop in 2Q15-3Q15 (low season), but rebound continuously yoy owing to good feedback from subscribers and lower regulatory cost since the percentage of subscribers migrated from 2G network (25% regulatory cost) to 3G network (5.25% regulatory cost) would increase from 80% to over 95%. Meanwhile, THCOM's profit would grow continuously in 2Q15-3Q15 since the occupancy rate of Thaicom 7 would increase from 40% in 1Q15 to 100%. INTUCH's earnings are projected to make the year's peak in 4Q15 mainly owing to higher shared profit from ADVANC. ADVANC would enter a high season and stop recognizing B3.0bn/quarter amortization cost after the 2G spectrum concession expires on September 2015. Overall, we maintain INTUCH's earnings forecast, estimating FY2015 net profit to grow by 16% to B17bn.
- Good upside and dividend yield
We maintain INTUCH's fair value (based on ADVANC’s fair value of B285 and THCOM’s fair value of B51) at B113, implying 44.8% upside. Dividend yield can be expected above 6.5%p.a. We reiterate BUY.
