Shin Corporation

Shin Corporation Plc (INTUCH)
We think INTUCH’s high and defensive yield will appeal to investors’ search for a refuge from market volatility. Investors will also get exposure to AIS’s 3G upside at a cheaper price. On top of that, THCOM’s turnaround and digital TV venture should whet appetites.

INTUCH is the holding company of AIS and THCOM. We initiate coverage on the stock with an Outperform call. Our target price is based on a blend of DDM and SOP, with a 15% discount to the SOP. The stock is trading at a 22% discount to its market-based SOP value, making it a cheap play on AIS’s 3G theme and THCOM’s turnaround and digital TV venture should wet appetites. INTUCH is the holding company of AIS and THCOM. We initiate coverage on the stock with an Outperform call. Our target price is based on a blend of DDM and SOP, with a 15% discount to the SOP. The
stock is trading at a 22% discount to its market-based SOP value, making it a cheap play on AIS’s 3G theme and THCOM’s turnaround.

A real dividend vehicle

We expect INTUCH to pass 98% of dividend income from related companies (mostly AIS) to its shareholders as dividends, implying 6-8% yield in FY13-15. The company’s dividend payment over the past five years supports our projection. Dividend upside should come from THCOM’s resumption of dividend payments and earnings surprise from AIS from better cost management in the running of its 900MHz and 2.1GHz networks. N

Narrower holding discount
We apply a 15% holding discount to our SOP value, based on INTUCH’s pre-2006 average discount gap, as we expect the gap to narrow as the free float increases. We also believe the
discount will fall if 1) THCOM’s earnings and dividend surge materialises, and 2) INTUCH’s new
venture into the digital TV broadcasting business materialises.
 

Note that INTUCH’s holding discount reversed to a premium thrice, when: 1) AIS was listed in 1993, 2) THCOM was listed in 1994, and 3) the Shinawatra family sold INTUCH to Temasek in 2006. The market currently assigns a 22% discount, offering an arbitrage opportunity.

Mobile-TV convergence

The analogue-to-digital conversion of terrestrial TV broadcasting may benefit content developers and mobile operators both. We believe INTUCH’s ambition to expand into the digital TV business will be a boon to the group’s businesses. If INTUCH obtains a digital TV infrastructure licence, the group should be able to integrate its mobile, satellite and TV footprints. Meanwhile, a digital TV broadcasting licence will allow the group to cross-sell content between its digital, satellite and mobile TV platforms.