Samart Telcoms

Samart Telcoms Plc (SAMTEL)

As expected; solid core earnings
SAMTEL reported a Bt176m net profit for 2Q13, down by 9% YoY and 33% QoQ. Excluding extra items in the quarter (a Bt30m FX loss and Bt3m in extra gains) and extra items in 2Q12 and 1Q13, core earnings would be Bt202m, up by 43% YoY and 39% QoQ. Net and core profit were in line with our model. Revenue exceeded our model by 6%. Gross profit was 7% higher than assumed. Tax expenses were lower than modeled, thanks to a deferred tax adjustment.
Result highlights
The core profit expansion was led by greater revenue, well-controlled SG&A and lower tax expenses. Revenue jumped by 38% YoY and 10% QoQ to Bt2.3bn. It comprised Bt1.3bn from projects signed before YE12, Bt467m from contracts signed in 1Q13 and Bt479m from contracts signed in 2Q13. SG&A inched up by just 3% YoY and 1% QoQ, thanks to tighter cost control. GM was 19.3%, down from 21.6% in 2Q12 and flattish QoQ. Gross profit jumped by 23% YoY and 10% QoQ.
The five key projects signed before YE13 underpinning 2Q13 revenue were TOT 3G Phase 1 (Bt385m in 2Q13), PEA ERP (Bt160m in 2Q13), TOT SchoolNet Extension (Bt114m in 2Q13), AOT CUTE Outsource (Bt107m in 2Q13) and PEA AMR Phase 2 (Bt83m in 2Q13). SAMTEL recognized only slightly higher QoQ income from the TOT’s 3G Phase 1 project—Bt347m in 1Q13—as the site installation schedule has slid into 2H13. The firm recognized income from two new projects signed during 1H13—an IT System for the Ministry of Justice (Bt421m in 2Q13) and “Co-Site Rental” for TOT (Bt16m in 2Q13).
Outlook
We forecast Bt3.4bn in revenue for 3Q13, up by 85% YoY and 48% QoQ, led by the seven projects, listed above (Bt2.4bn in 3Q13), and new contracts expected to be signed in 3Q13 (about Bt1bn in 3Q13). With regard to TOT’s 3G  Phase 1 project, SAMTEL will realize Bt850m of the remaining Bt1.3bn in revenue for 300 new sites in 3Q13. It expects to sign the following projects in Aug-Sept—Incremental SAP license (PEA; Bt420m in total), AIMS Network Migration (AOT; Bt380m) and 3G Extension (TOT; Bt350m). The firm signed a Bt170m Network Satellite project with the Interior Ministry in July. We preliminarily estimate a Bt280m net profit for 3Q13, up by 18% YoY and 59% QoQ.
What’s changed?
We maintain our FY13 net profit forecast unchanged.
Recommendation
Our BUY rating stands, premised on project backlog upside and incremental value from two big ticket projects—APPS and 3G Phase 2.