Samart Corporation

Samart Corporation Plc (SAMART)

Investment thesis
We still rate SAMART and SAMTEL as top sector picks for FY13. Their valuations remain cheap—SAMART's FY13 PER is 11.7x and SAMTEL's is 11.5x. There is major scope for upside our valuation and earnings forecasts from: 1) SAMTEL's TOT 3G Phase 2 and APPS projects, 2) SIM's MVNO turnaround and greater handset sales and 3) a network license for Samart Engineering and set-top box sales. SIM's valuation looks stretched now. We will upgrade our SAMART valuation and forecasts soon to factor in our FY13 earnings forecast revision for SIM.
Management offers bullish FY13 guidance
Management guided for the following FY13 numbers:
SAMART's consolidated revenue will jump by 67% YoY to Bt30bn and its net profit by 50% YoY to Bt1.5bn.
SAMTEL's income will rise by 88% YoY to Bt15bn and its bottom-line by 70% YoY to Bt1.4bn.
SIMs's top-line will rise by 69% YoY to Bt11bn and its net earnings by 200% to Bt320m.
SAMART's Bt30bn in consolidated FY13 revenue will comprise: 1) SAMTEL (Bt15bn), 2) SIM (Bt11bn), 3) related businesses (Bt2.4bn) and 4) utilities businesses (Bt1.7bn).
FY13 drivers—SAMTEL and SIM
Management guides that SAMTEL’s FY13 revenue and net profit growth will be led by the TOT 3G Phase 2 project, which it expects to open for tender in April-May 2013. It claims that SAMTEL's backlog will jump to Bt40bn at YE13 from Bt10bn at end-March 2013. For the TOT 3G Phase 1, SAMTEL had installed 3,800 sites at YE12 and will complete all 5,200 sites by May 2013. SIM’s FY13 recovery will be driven by smartphone handset sales (2.2m out of 3.2m) and a turn-around for its MVNO business (1.2 MVNO subs at YE13). Next month, SIM will sign a 12-year MVNO contract with TOT to use 40% of its MVNO's capacity (equal to 2.8m subs of a capacity of 7m subs).
Across other businesses, SAMART plans to list One-to-One Contacts (its call center business) on the SET in 3Q13. Samart Engineering expects to apply for a digital network license from the NBTC in 1Q13 and will sell digital-to-analogue set-top conversion boxes (the NBTC plans to issue free coupons to 22m households to buy set-top boxes). We believe management has already factored the TOT 3G Phase 2 and APPS projects and SIM’s recovery into its guidance. We have not yet plugged those numbers into our forecasts.
expects to apply for a digital network license from the NBTC in 1Q13 and will sell digital-to-analogue set-top conversion boxes (the NBTC plans to issue free coupons to 22m households to buy set-top boxes). We believe management has already factored the TOT 3G Phase 2 and APPS projects and SIM’s recovery into its guidance. We have not yet plugged those numbers into our forecasts.