Thaicom

Thaicom Plc (THCOM)

Investment thesis
We expect strong 2Q13 and 2H13 core earnings growth, led by the absence of Mfone losses, revenue expansion for Thaicom 5 and IPSTAR (from TOT and China) and the start-up of Thaicom 6 in Sept 2013. BUY!

Robust 2Q13 core profit estimate
We estimate a Bt65m net profit for 2Q13, down by 44% YoY and 81% QoQ. Excluding extra items—a Bt180m FX loss in 2Q13, an FX gain and the reversal of the Mfone impairment in 1Q13—core profit would be Bt245m, up by 49% YoY and 52% QoQ. The expected YoY core profit jump is thanks to: 1) a full quarter of no Mfone losses to book, 2) greater revenue at Thaicom 5, IPSTAR and Lao Telecom and 3) better OPEX control. The QoQ jump is due to a dive in SG&A (legal and financial fees tied to the winding up of Mfone were booked in 1Q13).  
The top-line should post a 5% YoY decline (but a 1% QoQ rise) in 2Q13, due to the absence of Mfone revenue. We expect Thaicom 5’s income to report an 8% YoY rise on value-added services and price increases for contract renewals. IPSTAR revenue is assumed to have grown by 2% YoY and 8% QoQ on 50% greater bandwidth usage by TOT, effective April 2013, and increased bandwidth usage by both the Australian govt’s National Broadband Network (NBN) and MEASAT of Malaysia (we now don’t expect any Chinese revenue till 3Q13). GM should be 42% (30.3% in 2Q12 and 38.9% in 1Q13). 

Chinese revenue to start in Sept or Oct 
IPSTAR won’t see any Chinese revenue till Sept or Oct 2013 because execution the deal with its Chinese partner, Synertone, which is listed on the HKSE, won’t be finalized until some regulatory issues are sorted out. Assuming that the deal goes through, we estimate minimum Chinese revenue of Bt70m/quarter (or US$8.4m/annum; US$80m over the 9.5 years of the contract) plus an 8% revenue-share of actual usage of Synertone’s clients. We maintain our Chinese revenue forecast at Bt300m per annum, FY14-15. IPSTAR expects greater bandwidth usage among Indonesian and Philippine clients in 2H13. A deal with one Indian telco is also anticipated in 2H13.
Thaicom 6 was 65% booked as of July 2013