Total Access Communication

Price Target : Bt84.00

§          Expiry of debt covenant in August should push the announcement of a special dividend by year-end; we included Bt10 special DPS in FY11F

§          3G license - expected early 2013 - could enhance NPV by 34%, boosted by higher financial gearing

§          Attractive 19.6% dividend yield for FY11F (6.6% normal plus 13.0% special) and 6.1% for FY12F

§          Reiterate BUY with raised DCF-based TP of Bt84.00; proposed tax cut could add Bt8.80 a share

Included Bt10 special DPS in FY11F. DTAC can pay up to Bt17.2 a share and keep its retained earnings (end-3Q11F) above zero (accounting requirement). And to maintain its current credit ratings, DTAC needs to keep its net debt/EBITDA below 1.0x. This implies it cannot pay more than Bt15.1 special DPS - we are assuming Bt10 in FY11F.

DTAC is a prime beneficiary of 3G license. DTAC has more room for cost savings than ADVANC (30%-6.5% vs. 24%-6.5%) and higher financial gearing. The increased cash flow of a higher-geared company would result in a larger increase in equity value. We estimate cost savings from the 3G license would enhance its NPV by Bt28.60 a share (34%) to Bt112.60, from Bt84.00.

Reiterate BUY. DTAC offers compelling 19.6% dividend yield (6.6% normal plus 13.0% special) for FY11F and 6.1% for FY12F, based on 100% payout ratio.