Thaicom

Thaicom Plc

Highlights from analyst meeting: Management says we can expect to see the
signing of a contract with a big client in India very soon. The okay by the government
for more than one operator for its iPSTAR gateways since end-2011 gave THCOM the
chance to expand service to other clients in India in addition to its original client, a
fixed-line operator. At the analyst meeting yesterday, THCOM said it is in talks with one
big conglomerate and expects contract signing by year’s end. THCOM’s CEO said that
this client could take 80-100% of the rest of iPSTAR bandwidth in India. From our
calculations, the bandwidth allocation to India is ~6 Gbps. 1 Gbps has been taken
already; 80-100% of the rest is equal to ~4-5 Gbps which is equal to 10-13% of iPSTAR’s
total capacity. This looks huge taken against iPSTAR’s current utilization of ~25%.
 

Thaicom 6 on track to reach profit breakeven before mid-2013 launch. Demand
for conventional satellite service remains very strong. Total TV channels broadcasting
on Thaicom 5 rose to 465 from 427 during 1H12. New capacity from the new Thaicom 6
satellite will be added ~mid-2013. Six out of 33 transponders (or 18%) are already
booked by Grammy, PSI and RS, and it is holding talks with other clients. THCOM thus
looks well on its way to meeting management’s target of 30% presales before launch,
which would put it at breakeven immediately upon launch.
 

Still plans to sell Mfone by yearend, could raise 2013F by 50%. The mobile
industry in Cambodia is very weak, with eight players competing strongly in a
comparatively small market and nearly every operator is in the red. The dim future has
led THCOM management to plan the sale of loss-making Mfone, its mobile operator in
Cambodia, by end-2012, though probably at a loss. Still, the loss on investment is a
one-off item and will close the books on the current quarterly losses of ~Bt130mn. We
will then be able to raise our 2013 forecast by 50% to Bt1.2bn and 2013F EV/EBITDA
would be only 5.1x.

Reaffirm Buy and Bt20 SOTP. With the performance turnaround and the promising
outlook for both iPSTAR and conventional satellites, we reaffirm Buy and Bt20 TP
based on SOTP consisting of Bt18.3 per share for the satellite and telephony businesses
(based on DCF, 9.8% WACC and 1% terminal growth) and Bt1.7 per share for its 42%
holding in CSL (with TP of Bt8.2). THCOM is currently trading at 2012F and 2013F
EV/EBITDA of 7.1x and 6.1x respectively which is still lower than its ten-year average of
8.4x. In addition, at our TP of Bt20, THCOM would trade at 2012F and 2013F EV/EBITDA
of 8.1x and 7x respectively. We confirm our Buy.