Thaicom

Thaicom Plc (THCOM)
 

Below estimate: THCOM reported a Bt42m net profit for 1Q12, against net losses of Bt167m for 1Q11 and Bt315m for 4Q11. Stripping out extra items—a Bt12m FX gain and a Bt41m one-time impairment for Mfone—core profit was Bt71m, down 16% QoQ but a big YoY improvement from the 1Q11 core loss of Bt153m. The reported net profit was 39% below our estimate, due to the Mfone impairment. Core profit was 25% short of our estimate, largely because Mfone revenue slumped and service costs related to the IPSTAR were higher than expected (heavy gateway operating costs in China).
Results highlights: The YoY turnaround was due to stronger revenues from conventional satellites (up 18% YoY) and IPSTAR (up 47% YoY) and well-contained OPEX. Thaicom 5 revenue was driven by new bandwidth sales to satellite TV broadcasters (enabled by the use of bandwidth compression technology). Receipts from NBN (Australia) and MEASAT (Malaysia) in 4Q11, a sales price increase for Softbank (Japan) since April 2011 and the contract signed with KDDI (Japan) in Dec 2011 drove a 61% YoY jump in IPSTAR service revenue.
The QoQ core profit slippage was due to margin squeeze at IPSTAR (due to higher costs) and a deeper loss at Mfone. Gross profit from conventional satellites rose 26% YoY while IPSTAR turned around to post an Bt87m gross profit from 1Q12 (from a Bt74m gross loss in 1Q11). The telephone gross loss deepened by 39% YoY and 350% QoQ, even though the gross profit at the Laos operation rose both YoY and QoQ.
Outlook: We expect a core profit in the range of Bt70-100m for 2Q12, a YoY turnaround from a Bt16m core loss in 2Q11. The key drivers are sustained Thaicom 5 service revenue growth (underpinned by further bandwidth sales to satellite TV broadcasters), IPSTAR service revenue expansion, especially bandwidth sales (backhaul) to Japanese telecoms firms (the latest is NTT Docomo, effective March 2012) and receipts from MEASAT and NBN, effective 4Q11.
What’s changed? We have revised down our FY12 net profit forecast by 9% to Bt428m to factor in the Mfone impairment (a non-cash item).
Recommendation: Our BUY rating stands.