Banpu

Banpu Plc
Investment thesis: We believe that the revamp in DTAC’s shareholding structure clears any overhanging risk of being classified “foreign dominated”, so paving the way for it to bid for a 3G-2.1GHz license. Given regulatory clearance and a 2H12 operational rebound with improved network quality, we think now is a good time to accumulate the stock ahead of 3G auctioning in mid Oct. DTAC remains our top pick in the ICT sector, for the following reasons: 1) the greatest scope for earnings upside from 3G, 2) a 2H12 earnings rebound and 3) a good yield.   
DTAC rejigs shareholding structure: The firm informed the SEC of its new shareholding structure. It is very different from the previous structure, which Telenor’s lawyers obviously felt was a bit ambiguous. The effective stake of Bencharongkul family (which founded DTAC) rises to 2.98% from 2.26%. Telenor also established a new subsidiary in SIngapore, Telenor South East Asia Investment Pte Ltd (TnSEAI), which has holdings in Thai-registered shareholding vehicles. Effectively, Telenor’s direct and indirect stakes in DTAC inch up from 60.8% to 62.1%.
The new shareholding structure is complicated; please look to the flow chart (Figure 1) on page 2 for the details (the previous shareholding structure is detailed in Figure 2)
Clearance of the FD issue: DTAC should now be in the clear over the NBTC’s two “foreign dominated” classifications: 1) foreign holdings whose voting rights exceed 50% of the total and 2) foreign majority control of voting rights at a shareholder meeting. Hence, it can bid for 3G-2.1GHz licenses.
2H12 rebound: Management claims that DTAC’s network quality in Bangkok is now much better with the completion of its upgrade in Bangkok in 2Q12. The firm also hinted that churn will decline in August.