Jasmine Broadband Internet Infrastructure Fund

Jasmine Broadband Internet Infrastructure Fund

4Q15 net profit beat model due to the gain from asset revaluation
JASIF posted a Bt1.83bn net profit, or earnings per unit (EPU) of Bt0.33 for 4Q15, an increase of 58.1% QoQ. If we strip out Bt0.08m in accounting loss on investments and Bt641m accounting gain from the asset revaluation, core profit (or the funds available for dividend payment) for 4Q15 would be Bt1.19bn, a rise of 2.8% QoQ. In Dec 2015, the Fund hired the C.I.T. Appraisal Co., Ltd to revalue the Fund’s asset of 980,000 core km of optical fiber cable (OFC). The appraiser derived the new asset value at Bt55,641m and the Fund recognized the accounting gain of Bt641m in 4Q15. Note that such noncash accounting gain won’t be passed to the unit holders as incremental dividend. The Net Asset Value (NAV) was Bt10.34/unit at YE15.
Net profit beat our model by 55% (against our previous Bt1.18bn estimate), due to the above one-time gain, but core profit was in line with our model. Rental revenue was in line with our estimate. JASIF has yet to announce the dividend-per-unit (DPU) amount for 4Q15 but we assume that it will pay a DPU of Bt0.30/unit for 4Q15 (including the Bt461m capital reduction proceeds) based on a 99.5% dividend payout ratio. The estimated dividend yield (including capital reduction) is 3.4% for the quarter. We estimate the FY15 DPU (including capital reduction proceeds) of Bt0.82/unit (or the annualized yield of 10.5% for FY15).
Result highlights
JASIF delivered rental income of Bt1.28bn, or a rise of 2.7% QoQ, based on 883,000 core km of optical fiber cable (OFC) at YE15, against 860,500 core km at end-Sept 2015. The new 22,500 core km of OFC were transferred to the fund in 4Q15 (or 245 core km/day), which was equal to those new ones transferred during 3Q15. The rental rates for both the Main and Second Lease agreements were unchanged QoQ. The net rental income was Bt1.23bn, after deducting OPEX—Bt44m for OFC maintenance, Bt3m for right of way and Bt1m for insurance—which implied a GM of 96.3%. The profit after fund management fees/expenses was Bt1.21bn, which implied OPM of 94.7% and a Bt1.19bn core profit implied a core profit margin of 93.5%.   
Outlook
We estimate a Bt1.23bn core profit for 1Q16, or expansion of 2.8% QoQ, led by 22,500 new core km of new OFC transferred to JASIF in 1Q16. We estimate Bt1.31bn in rental revenue for 1Q16, up 2.7% QoQ and forecast a Bt0.22 DPU for 1Q16 (excluding a capital reduction).
What’s changed?
We have maintained our FY16 net profit forecast unchanged.
Recommendation
Our BUY rating stands, based on the attractively high annualized yield (including capital reduction) of 10.5% for FY15 and 10.6% for FY16.