Mono Technology

Mono Technology

Investment thesis
We have initiated coverage on MONO with a BUY rating. Based on the Gordon’s PEG valuation method, we derived a YE14 target price of Bt14.50. That implies an FY14 PER of 21x, equal to the sector mean. We like MONO’s fundamentals—the growth outlook is clear, backed by revenue and fat GM. There is also scope for upside from offshore business expansion and the possibility of the firm winning a digital TV license. We have identified the following four major investment themes:
Theme 1—surfing the 3G wave
Ownership of smartphones and tablets is expanding swiftly in Thailand in tandem with declining device prices and rising disposable incomes. The commercial launches of 3G-on-2.1GHz networks in May will mean far better signal quality and substantially faster wireless data downloading. The much-enhanced convenience of short download times (far less time waiting to video to buffer) will boost the popularity of downloading onto mobile devices.
Theme 2—internet advertising growth
MONO’s www.mthai.com website has ranked third in Thailand for page views since 2008. The website will be one of the most popular destinations in the country for online ad spend. We forecast that MONO’s internet business revenue will jump 38% in FY13. There’s no telling how fast ad spend could rise on its websites, once the 3G networks have nationwide coverage making wireless internet available to all.
Theme 3—impressive earnings CAGR of 20%, FY13-15
We forecast that MONO will post net profits of Bt798m for FY13 (up 31% YoY) and Bt965m for FY14 (up 21% YoY), led by increasing MVAS revenue and GM expansion, the 3% headline corporate tax cut to 20% in 2013, anticipated bottom-line improvements for two overseas subsidiaries—Mono Indo and Mono Korea—and BOI tax privileges for two subsidiaries through to 2019. Our model indicates that the firm will deliver an impressive net earnings CAGR of 20%, FY13-15, driven by a revenue CAGR of 16% (FY13-15) and gross margin expansion from 63.7% in FY12 to 67.7% in FY13 and to 68-69% in FY14-15.
Theme 4—scope for upside from a digital TV channel license
The NBTC plans to auction 24 commercial digital TV channel licenses during August-October 2013. MONO aims to bid for one standard variety channel. If it were to win a license, we would expect the firm to relatively easily adapt its content base to TV broadcasting. Assuming an auction price range of Bt500-700m for one standard channel and post-IPO cash-on-hand of Bt2.7bn, MONO could easily finance a digital TV license this year.