Jasmine Broadband Internet Infrastructure Fund

Jasmine Broadband Internet Infrastructure Fund

Investment thesis
We maintain our stance toward JAS that it will be able to make its first 900MHz license payment on 21 Mar and become Thailand’s fourth mobile player. Hence, JASIF’s operating license will remain unaffected. Based on recent comments from one of the NBTC’s commissioners that dropping the 900MHz license will have no impact on JAS’ other operating licenses, we think that this should lift overhanging concern about JASIF share price (although this issue requires an NBTC board decision). We think that its recent price weakness presents good timing to accumulate the stock with its highly attractive dividend yield of 10.3%. Our BUY rating stands.
Will dropping 4G license have any impact on JAS licenses?
Mr. Prawit Leesathapornwongsa, an NBTC commissioner, said that if JAS Mobile Broadband, the subsidiary of JAS, failed to make its first 900MHz payment, it would have no impact on any of JAS’ existing licenses that the company has received from the NBTC because they were different entities. However, if the NBTC Office said that it would impact other business operating licenses, it would be their opinion. This matter needs to be taken to the NBTC meeting before any conclusion is reached. This comment comes from one of NBTC commissioners, not the NBTC board, and runs against the NBTC secretary-general Takorn Tantasith’s statement that such a situation would have an impact on other JAS operating licenses (including its 3BB and JASIF licenses).
Paving way for JAS to drop 900MHz license
We think that this issue has so far been inconclusive and requires legal interpretations and opinions. Assuming the above scenario of dropping the 900MHz license and the lack of impact on other operating licenses, it would lift the overhanging concern on JASIF regardless of whether or not JAS would make its first 900MHz license payment. JAS could drop the first 900MHz license payment because it would be liable to only Bt644m insurance and any future liabilities and expenses incurred from the new 900MHz auction. Assuming the worst-case scenario that it would impact other operating licenses (including JASIF) and that JASIF’s operating license would not be extended beyond 2026 because it would be blacklisted from requesting the future licenses, we estimate that it would impact its DCF-based valuation by 46% (from Bt12.25 to Bt6.6) due to the factoring out the perpetual terminal value.     
Does JAS share buyback imply a new potential partner?
We believe that the JAS’ recent announcement of share buyback at 20% of total paid-up shares is in some way connected to its future capital increase through private placement (PP) to specific investor(s), which might have taken place before its share buyback program to avoid the major shareholder’s stake dilution in JAS once the new partner steps in. We assume that it might use foreign banks to provide the bank guarantee via the new partner connection to support its first payment on Mar 21. We maintain our assumption that JAS would make the first 900MHz license payment on Mar 21.