Thaicom

Thaicom Plc (THCOM)

Above estimates: The reported 4Q11 net loss was 11% shallower than our model, thanks to a lower-than-expected deferred tax provision (Bt360m against our estimate of Bt400m). Furthermore, core profit exceeded our estimate by 30%, led by other income. Two items were booked under other income in 4Q11: 1) a Bt29m gain from the sale of an IPSTAR gateway in Malaysia to MEASAT Satellite Systems and 2) Bt18m in compensation from a DTV flood insurance claim. Pre-tax profit exceeded our estimate by 11%.
Results highlights: THCOM posted a Bt315m net loss for 4Q11, against a Bt172m net loss in 4Q10 and a Bt16m net profit in 3Q11. Besides FX, there was a Bt360m one-off deferred tax provision, broken down into Bt351m for THCOM and Bt9m for CSL. Stripping out FX and the deferred tax item, core profit rose 118% QoQ and turned around from a 4Q10 net loss of Bt165m. The sustained recovery in 4Q11 was led by higher conventional satellite revenue (up by 21% YoY and 8% QoQ) and a jump in IPSTAR service income (up by 74% YoY and 6% QoQ). IPSTAR revenue was boosted by receipts from NBN and MEASAT in 4Q11.
The QoQ drops in revenue and IPSTAR gross profit were due to a high 3Q11 top-line base associated with Bt253m in one-time IPSTAR income—a Bt100m gateway access fee and Bt153m in gateway sales. Gross profit from conventional satellites rose 34% YoY, thanks to greater bandwidth sales to TV operators. The Internet unit’s gross profit plunged 97% YoY on lower DTV dish sales in Thailand during the 4Q11 flooding. The telephone unit’s gross loss was 87% shallower QoQ—Mfone’s loss diminished and revenue at the Laos operation improved.
Outlook: We believe that the core profit turnaround will continue through FY12, underpinned by IPSTAR marketing progress in prime markets (especially China) and a telephone turnaround with the sale of Mfone (expected in 1H12). Thaicom 6 will launch in 2Q13, while Thaicoms 7, 8 and 9 are slated for launches, 2H14-FY15.
What’s changed? We maintain our FY12 profit forecast unchanged.
Recommendation: Our BUY rating stands.