Shin Corporation

Shin Corporation Plc (INTUCH)

In line with estimate: INTUCH reported a Bt3.47bn net profit for 2Q12, up 30% YoY but down 2% QoQ. Stripping out extra items—FX and an impairment for ITV—core profit would be Bt3.62bn, up 30% YoY and flattish QoQ. Both reported net and core profits were in line with our model. Equity income from ADVANC was as we expected, while THCOM’s profit was slightly higher than our assumption, due to lower tax expenses than expected. The firm announced a Bt2.2 DPS for the April-Aug 2012 period.
Results highlights: The YoY core profit jump was attributable to greater equity income from ADVANC. The telco’s YoY core profit rise was led by a headline corporate tax cut to 23%, increased voice and nonvoice revenues and lower network amortization and interest expenses. ADVANC’s service revenue (excl. of IC) rose 12% YoY and was flat QoQ, while its network amortization declined with the full depreciation of BTO assets. The QoQ profit dip was due to increases in network OPEX and marketing expenses. 
THCOM’s YoY core turnaround was led by stronger Thaicom 5 revenue (up 13% YoY), higher IPSTAR bandwidth sales (up 32% YoY)—and better OPEX control (SG&A plunged 18% YoY). New bandwidth sales to satellite TV operators pushed up Thaicom 5’s income, while receipts from NBN (Australia) and MEASAT (Malaysia) since 4Q11, full revenue recognition from two new Japanese clients—KDDI and NTT Docomo—and increased usage of India fueled IPSTAR’s top-line. The telephone unit’s gross loss was flat YoY but deepened 144% QoQ.
Outlook: We forecast a 3Q12 net profit of Bt3.4bn, up 34% YoY but down 2% QoQ (due to ADVANC’s seasonality). The expected YoY jump is underpinned by sustained growth in the telco’s voice and nonvoice revenue and by better control of OPEX and stronger satellite income at THCOM (Thaicom 5 and IPSTAR). 
What’s changed? Our 17% upgrade to our THCOM FY12 earnings forecast and 14% increase to our YE12 target price (to Bt20.5) pushes up our INTUCH FY12 earnings projection by 0.2% to Bt14.99bn and our NAV-based target price by 0.4% to Bt83.
Recommendation: Our BUY rating stands