Jay Mart

Jay Mart Plc (JMART)
High growth from migration to 3G. Operators are rapidly migrating their clients to 3G and we estimate more than 80% of the total numbers will need to migrate to 3G within 2015 as two 2G concessions expire. Currently, only 19mn of the total 89mn phones in use are 3G devices, meaning more than 70mn need to change to 3G phones. ADVANC’s 2G license will expire in 2015 and it urgently wants to move its customers to 3G. It has 38mn subscribers, but only 8mn so far have moved to 3G. This leads us to expect JMART to enjoy sales of Bt10bn in 2013, +39%YoY, or at least 27% CAGR in 2013-2015. We expect mobile phone and accessories vendors will still enjoy sales growth despite the expected slowdown in private consumption as more users upgrade to 3G.
High unit sales and average selling price (ASP). JMART is a multi-brand mobile phone vendor with market share of 14% of the estimated industry sales volume of Bt72bn in 2013 and Bt110bn in 2014. We estimate JMART’s unit sales to reach 1.5mn in 2013 and increase to 2.0mn in 2014 and 2.5mn in 2015. Its own goal is 1.5mn this year, 2.5mn in 2014 and 3.0mn in 2015. As of June 2013, JMART’s average selling price is Bt6,376 per unit, 51.6% above the market average of Bt4,206. Prices are expected to decline, but this will be made up for by higher volume. JMART’s accessory sales have a high gross margin of 30% with average selling value of Bt20mn per month, giving estimated revenue of Bt720mn this year with gross profit of Bt240mn.
Investment in Myanmar, the most interesting market in AEC. Based on mobile phone use data for Myanmar, penetration rate is only 5% of the population of 60mn, a far cry from the 140% in Vietnam and 130% in Thailand. JMART is setting up four shops in Myanmar and targets 20 shops in 2013 through a joint venture between JMART (60%) and a local partner, MK Group (40%). Though Myanmar’s population is roughly equal to Thailand’s, it still has only 3.8mn mobile phone numbers. Its government hopes to grow this to 30mn by 2016.
Still buy, though lower TP to Bt28. With 3G more readily available and more consumers switching to smartphones, JMART will enjoy a buoyant smartphone market through 2015. However, it is opening fewer branches than assumed and we thus slightly lower 2013 earnings by 3% to Bt472mn from Bt487mn. At the same time, we raised 2014 by 4% to Bt572mn from Bt561mn, raising our assumption for unit sales to 2.0mn from 1.8mn. Mobile phone sales contribute 93.5% of total revenues; the rest comes from debt collection (50% gross margin) and space rental (16.7% gross margin). Overall gross and net margin are expected to remain at 13.5% and 3.7% respectively. We are switching our valuation of JMART from DCF to PER of 20x in 2014. This changes target price to Bt28 from Bt34. We still rate it a BUY.