Samart Corporation

Samart Corporation Plc (SAMART)
Several new projects lining up. We made a conference call with the head of
SAMART’s IR and discovered that it expects five large projects (average size over Bt1bn)
to be settled or opened for bidding before the end of next month. These include ITrelated
projects for government agencies, AOT’s Advance Passenger Processing System
or APPS (bidding expected next week) as well as non-IT projects. As these pop up in the
news, it will brighten market sentiment toward the stock.
Two potential benefits from DTTV. The National Broadcasting and
Telecommunication Commission (NBTC) has decided to hold the auction for Digital
Terrestrial Television (DTTV) in December. Though not bidding directly, SAMART group
is poised to gain in two arenas. Firstly, DTTV means that up to 20mn households will
need new set top boxes – giving a huge boost to Samart Engineering’s set-top box
business. Secondly, SAMTEL’s services are likely to be in demand as the four network
providers will need to upgrade.
Handset turnaround, earnings up ~5x in 2013F. A combination of factors has
brought SIM (in which SAMART holds 58%) back to life: 1) rising demand for smart
devices from both wider 3G network coverage and the rising popularity of social
networking (in 1Q13, Thai Instagram users leapt 163% YoY to 630K and Facebook users
rose 28% YoY to 18mn) and 2) development of its i-Mobile smartphone with designs
and features to meet market demand. We expect SIM’s earnings to recover by almost
5x to ~Bt900mn, a new record, in 2013F.
Outstanding earnings growth of 58% in 2013F. After the 50% YoY core earnings
growth in 1H13A, we expect SAMART’s 2013F earnings to show outstanding growth of
58% to a new high of Bt1.46bn in 2013F, driven largely by smartphones.
Maintain Buy and Bt24 TP. Given the outstanding earnings growth of 58% this year,
upcoming good news as more projects are added plus the boost from DTTV, we remain
buyers. We keep our mid-2014 TP of Bt24 unchanged, based on SOTP consisting of: 1)
Bt8.8/share for SAMTEL based on its Bt21 TP, 2) Bt12/share for SIM based on consensus
TP of Bt4.8 and 3) Bt4.1/share from non-listed companies (based on 2xBV).