Total Access Communication

Total Access Communication Plc (DTAC)

1H12 core net profit was 4% above our estimate but 2% below consensus on rising network costs vs. strong data revenue growth. We expect voice revenue recovery and cost improvement only in 2H12 and 1H13. 1H12 dividend payout was 93% vs. anticipated 100%. We raise our FY12-14 estimates on strong data demand in FY12, benefits from the network swap in FY13 and 3G regulatory cost-savings in FY14.
We raise our DCF-based target price (9.9% WACC, 2% LTG). However, we maintain our Neutral call given demanding valuations and the lack of fresh re-rating catalysts. 

Unexciting results
DTAC’s 2Q12 core net profit of THB2.8bn was down 1% yoy and 5% qoq on the back of a higher revenue share rate and rising network opex. Although data revenue soared 89% yoy and service revenue jumped 9% yoy, EBITDA on service revenue excluding revenue sharing fee expanded only 7% yoy, implying that margins are under pressure from higher low-margin data revenue.
THB2.27 interim DPS

Against consensus and our estimates
at 100% payout, DTAC announced 1H12 dividend payout of 93%, or THB2.27 DPS from 1H12 net profit. The board has approved raising the minimum dividend payout from 50% to 80% and will pay dividends quarterly vs. semi-annually.

Some good news delayed
The CEO said the full financial benefit of the network swap programme will kick in from FY13 onwards, not in FY12 as earlier guided. The CFO said that voice revenue is likely to at least
stabilise in 2H12 after falling three quarters in a row. Given the lack of price and non-price activities, we think improving network quality will be inadequate to restore market confidence quick enough to recover voice revenue in the near term.
 

Earnings revisions
We revise up our FY12-14 estimates by 5-24% and raise our DCF-based target price by 7.5% to THB86 (still 9.9% WACC, 2% LTG).