Shin Corporation

Shin Corporation Plc (INTUCH)

3Q12’s profit weakens slightly after THCOM sells MFone
INTUCH posted 3Q12’s net profit at B3,467m, dropping only
1.9%qoq. Share of profit from ADVANC in which INTUCH holds
40.45% stake has increased 3.3%qoq to B3,602m as a result of
an increase in net additions by 590,000 units, compensating a
slight decrease in ARPU and a significant fall in mobile sales on
customers’ waiting for a launch of iPhone5 in the end of the
year. However, THCOM, another subsidiary of INTUCH with
shareholding of 41.14%, faced a loss of around B107m in this
quarter, compared with a profit of B162m in 2Q12, due mainly
to the recognition of impairment loss on MFone and selling
expense reserves of B251m in total after THCOM sold the
business.

Significant growth foreseen in 4Q12 from ADVANC and THCOM
4Q12’s profit is projected to grow significantly from 3Q12’s due
to supports from the subsidiaries. ADVANC’s net additions and
non-voice revenue would increase as a result of a high season
and a launch of iPhone5. At the same time, THCOM would show
notably better norm profit as it would stop recognizing loss from
MFone by B100 each quarter and the interest expense would
decrease from a repayment of B3.3bn bonds maturing in
November. In order to reflect improving earnings of THCOM
after it could sell MFone that had borne a loss of B500m a year,
we revise our profit forecast for INTUCH to be in line with the
businesses of the subsidiaries. Under the new forecast, net profit
in 2012 of INTUCH is B14,250m, decreasing 13.9% from the
prior year as in 2012 there was a profit from a decrease of
investment in ADVANC. At the same time, norm profit in 2012 is
projected at B14,499m, increasing 54.6%, with the continued
growth of 15.5% in 2013.

Imply 43.2% upside with FY2012’s div yield of 7.2%
Reiterate BUY
With 2013’s fair value of ADVANC at B250 and of THCOM at
B25, we derive 2013’s fair value of INTUCH (with 10% discount
as free float is still lower than above 40% in the past) at
B87/share. 2012’s dividend yield is expected at B7.2%p.a.
Recommend BUY.