True Corp. Plc

True Corp. Plc  

 

TRUE is at the starting line in the race toward a multi-year earnings acceleration. Our key theme for TRUE’s value as an investment - steady gains in revenue market share – will be proved out as it leads 2Q15 to break the usual low season pattern, with profit at Bt700mn-Bt1bn. We expect profit to reach Bt4.2bn for the year 2015, then double in 2016 and again in 2017 to reach Bt14bn. We expect its first DPS in 1H15 at Bt0.045. Buy with DCF-based PT of Bt17.  

Company positive, lines up with SCBS. The overall tone at TRUE’s analyst meeting Friday was positive, with most developments largely in line with us. Key takeaways:  

Though 2Q is generally the low season, management believes 2Q15 will break the pattern, fuelled by the mobile business, where the firm continues to enjoy strong revenue momentum driven by high growth in non-voice revenue and a steady gain in revenue market share from 18.4% in 1Q15. 

The rise in operating expenses in 1Q15 came from the higher costs necessary to expand 4G service, which it is pushing forward faster than initially planned. By the end of April, 4G coverage was at 80%, ahead of competitors. TRUE believes operating costs, especially marketing expense, should simmer down for the remaining quarters of the year as its 4G brand has already achieved market recognition. Despite the spending on the big marketing thrust for 4G, the firm asserts that its cost control efforts continue and that marketing expense this year will not exceed last year’s level, allowing EBITDA margin to widen.  

Following board approval of the elimination of retained loss, TRUE is determined to pay its first dividend in 20 years this year, beginning with 2Q15. It says dividend cash will not be needed to fund its bid for the upcoming 1800MHz auction as it has several routes to get the cash for the bid, including supplier financing and sale of some of its stake in TRUEIF from 33% now to bring it closer to its 18% target.    

In response to concerns about regulatory issues about the disputed towers with 

CAT, TRUE notes that the concession agreement between CAT and DTAC has been written differently than the agreement between CAT and TRUE and thus it will not face the same issue as DTAC about the sharing of concession assets with CAT.  

Core profit to continue into 2Q15 with profit for 2015. We expect TRUE to post a core profit of Bt700mn-Bt1bn in 2Q15, driven by accelerating revenue growth in its mobile business. Cost controls will also help drive profit in 2Q15. We maintain our full-year forecast of Bt4.2bn, turning around from a big loss in 2014, then double to Bt10bn in 2016. We also expect the first interim DPS of Bt0.045 in 1H15 (based on 50% dividend payout ratio) and final DPS of Bt0.045. This implies insignificant dividend yield of 0.8%.