Thaicom

Thaicom Plc (THCOM)
Investment thesis
Following the preview visit, we expect robust 3Q13 earnings, led by the absence of an Mfone loss and greater revenues from conventional satellites (boosted by the interim satellite ahead of Thaicom 6’s launch), IPSTAR and Lao Telecom. Our BUY rating stands. We have rolled over our investment horizon to YE14 and have a new target price of Bt46.
Expect robust 3Q13 core profit
We estimate a Bt350m net profit for 3Q13, up 84% QoQ and a turnaround from the Bt107m net loss posted for 3Q12. Stripping our extra items—a Bt252m Mfone impairment in 3Q12 and FX—core profit would be Bt380m, up by 322% YoY and 5% QoQ. The expected YoY core profit jump is thanks to: 1) the absence of an Mfone loss (starting Feb 15), 2) higher revenue for conventional satellites, IPSTAR bandwidth and Lao Telecom (LTC), and 3) better OPEX control.
The modest QoQ rise is due to higher conventional satellite income generated by AsiaSat’s interim satellite at the 78.5E slot, starting August, ahead of Thaicom 6’s launch, which is tentatively scheduled for Nov-Dec 2013. The top-line is likely to report a 1% YoY dip (no Mfone revenue) but a 6% QoQ rise on greater conventional satellite and LTC income. We estimate that conventional satellite revenue increased by 8% YoY and QoQ, led by receipts from the AsiaSat’s interim satellite.
IPSTAR’s bandwidth income will post a rise of 9% YoY and 3% QoQ, led by greater usage in Australia, Malaysia and Thailand. TOT has increased its IPSTAR usage by 50% since April 2013. We expect modest QoQ usage rises by the Australian govt’s National Broadband Network (NBN) and MEASAT of Malaysia in 3Q13. LTC’s revenue should rise on subscribership and ARPU expansion. We assume GM of 42.5% for 3Q13 (42.6% in 2Q13 and 31.4% in 3Q12).
Chinese revenue commenced on Oct 16, 2013 
The shareholders of Synertone, THCOM’s HKSE-listed Chinese partner, approved deal execution between Synertone and THCOM at an EGM on Oct 15, 2013. So THCOM will recognize IPSTAR revenue from China, starting Oct 16, 2013—about Bt50m in 4Q13. We estimate about US$8.4m/annum over the 9.5 years of the contract plus an 8% revenue-share of actual usage of Synertone’s clients.
IPSTAR progress in other countries
The firm is in talks with private telcos in Indonesia and Philippines for IPSTAR bandwidth sales. Moreover, an IPSTAR bandwidth sale of 300-400Mbps to a small Indian telco is expected in 4Q13. The firm will also negotiate with NBN and MEASAT to increase their respective usage and the progress is expected in FY14.