True Corp.

True Corp. Plc  

 

TRUE’s takeover of revenue market share from peers is strengthening, at ~1.2% in 1Q16 from 0.75% a quarter in 2015 – to reach a share of 22% in 1Q16. We expect this to continue, backed by its 2G 900MHz network rollout in April. We thus stand by our forecast for a core loss only in 2016 with the bottom line back to the black in 2017, three years faster than the market expects. Buy.  

 

- Positive tone at meeting. TRUE’s management held an analysts meeting at which the tone was positive and coincided with our expectations. Key takeaways:  

 

- Management is confident it will raise Bt60bn cash from its equity issue, with CP group taking all unsubscribed shares from the upcoming rights offering (RO).  

 

Mobile business:

 

 TRUE’s gain in market share is strengthening – it grabbed 1.2% in 1Q16 to reach 22% (vs. 0.75% per quarter in 2015). Consumer perception of its superior network, particularly for 3G and 4G, coupled with the exclusive contract with CPALL to sell TRUE products and services are major factors behind the acceleration in revenue market share. It expects to continue to gain strongly in revenue market share through at least the next couple of quarters, backed by the commencement of 2G service on its new 900MHz network in April. Currently, its 2G covers 98% of the country’s population, equal to ADVANC’s 2G 900MHz coverage. TRUE believes this will boost its revenue market share to one-third of the total mobile market by 2018.    

 

On- line business:

 

- TRUE says it is beginning to feel the pinch brought by ADVANC’s entry into this arena, but minimally so far. ADVANC is now employing pricing strategy to tap TRUE’s corporate accounts and TRUE said it has let some corporate accounts go to ADVANC since the price was too low to cover the costs. TRUE reported flat earnings in this business both YoY and QoQ in 1Q16. It does not expect ADVANC to be a real threat, particularly in the retail market, for at least the next two years, as ADVANC’s coverage of households is limited. ADVANC targets covering ~2mn households in Thailand by end of this year compared with TRUE’s coverage of 10mn households by 1Q17. 

 

Reiterate Buy. We reiterate our Buy call on TRUE with our DCF-based target price now at Bt10.2, reflecting the dilution. We base our call on its expectation of a steady rise in revenue market share over the next two years at the expense of ADVANC and DTAC. This is underpinned by ongoing improvement in network quality for 2G, 3G and 4G. Based on our forecast, the cost of the license will put TRUE back in the red in 2016, but the gains in revenue market share will swing earnings back up from 2017.