Samart Telcoms
Eight new TOT board members to be named later this month BUY (maintained) Target Price: Bt19.00 Price (04/10/12): Bt18.00
Samart Telcoms Plc (SAMTEL)
What’s new? Gp Capt Anudith Nakornthap, the ICT minister, said that he has forwarded the names of eight proposed new members of the TOT board to the Ministry of Finance. He has nominated Mr Udom Puasakul, a previous director-general of the Public Works and Town & Country Planning Department, as the new chairman (succeeding Mr Panthep Chamrasromran, who resigned in Sept). Gp Capt Anudith expects the Finance Ministry to announce the names of the new TOT board members later this month. Note that the TOT board comprises 13 members including the chairman.
Three key priorities: The ICT minister said the board’s broad priorities will be: 1) the expansion of its broadband Internet and data businesses, 2) the acceleration of unfinished projects (such as TOT’s 3G Nationwide Phase 1 for which network installation is 60-70% complete) and 3) future projects, business models and long-term plans, including the 3G Nationwide Phase 2 project.
Positive sentiment to SAMTEL: The above news would appear to add weight to our expectation that the new TOT board will push the 3G Nationwide Phase 2 project. We anticipate that the ICT minister will submit the 3G Phase 2 plan to the NESDB for budget approval in 4Q12, then to Cabinet in 4Q12 or 1Q13. We assume that the Phase 2 project will open to tender in 1H13 and that installation will start 2H13-1H15.
Bt5.95/share incremental value: If the SAMTEL consortium were to win the TOT’s 3G Phase 2 project during 1H13 for Bt25bn (SAMTEL’s share would be Bt16.3bn) and the net margin were 8%, it would add Bt260m to our FY13 profit forecast (up 29%)—Bt0.45 extra to EPS—and Bt520m to our FY14 profit forecast (up 55%)—Bt0.89 extra to EPS. Applying a 13.3x PER, we estimate Bt5.95/share of added value as a result of TOT’s 3G Phase 2 project.
Action: Despite SAMTEL’s recent share price rally—which was prompted by anticipation that the TOT board will push through with Phase 2 and the SAMTEL-led consortium will win it—our BUY rating stands. There is considerable scope for value upside from Phase 2 and from AOT’s APPS project. We will factor in the incremental value from the projects as Cabinet approves them. SAMTEL’s valuation remains cheap—an FY13 PER of 12.1x against a long-term mean of 14.6x.
