Samart I-Mobile

Samart I-Mobile Plc (SIM)

Investment thesis
Following the 1Q13 preview meeting, we reiterate our view that SIM’s earnings will be robust in 1Q13 and the strong recovery will continue through the rest of the year. Also, the govt’s Tablet project is likely to open for tender in May. Our BUY rating stands, premised on an earnings recovery and the potential for an FY13 forecast upgrade.
Robust 1Q13 earnings expected
We estimate a Bt170m net profit for 1Q13, up by 593% YoY and 104% QoQ. Stripping out extra expenses in 4Q12 and FX, expected core profit would be Bt168m, up by 678% YoY and 47% QoQ. The assumed better numbers are due to a jump in smart phone volume, mean sales price and blended GM. We estimate sales of 899K handset units in 1Q13—894K units branded i-mobile and 5,500 units of other brands. Of the i-mobile handsets sold, we expect 381K units were smart phones (against 340K units in 4Q12 and 1,838 units in 1Q12). Sales of feature phones would have dropped by 50% YoY and 17% QoQ. 
The blended sales price is estimated at Bt2,555, up by 95% YoY and 15% QoQ, and the average i-mobile sales price at Bt2,526, up by 112% YoY and 16% QoQ. Blended GM is assumed at 28.5% in 1Q13, up from 17.1% in 1Q12 and 21.6% in 4Q12, led by a greater proportion of smart phones in the sales mix. Ten i-mobile handset models were available for sale in 1Q13, six of which were smart phones.
Momentum to be sustained through to year-end
We estimate sales of Bt800-900m in April and Bt1bn in May—against mean monthly sales of Bt768m in 1Q13—led by new smart phone models (i.e. “IQ X”, “IQ 9”, “IQ 6.1”), high season and sales orders carried over from March. We assume a Bt90m net profit for April alone from handset sales of 300K units.
Total handset sales volume of 1.2m is likely for 2Q13, we believe, of which 0.7m will be smart phones (up 84% QoQ). The average sales price is forecast at Bt2,800/unit (up by 114% YoY and 10% QoQ). Blended GM should exceed 30% with the launches of new, higher-priced smart phone models. Moreover, we expect SIM’s 2Q13 content revenue to rise by 20% QoQ because technical problems at the mobile operators in 1Q13 (related to the installation of new software ahead of the launch of 3G-on-2.1GHz networks) that disrupted its content business have been fixed. We preliminarily estimate a 2Q13 net profit of Bt200m, up by 775% YoY and 18% QoQ.
Upgrade to FY13 earnings forecast likely 
The firm has upped its i-mobile mean sales price targets by 7% to Bt2,900 for FY13 and by 8% to Bt3,000 for FY14. It has also increased its smart phone sales volume targets by 4% to 2.31m for FY13 and by 15% to 2.77m for FY14. As such, there could be scope for a consensus forecast upgrade.