Samart Corporation

Samart Corporation Plc (SAMART)
Core profit somewhat above our estimate 
SAMART posted a Bt393m net profit for 3Q13, up by 43% YoY and 10% QoQ. Excluding extra items—a Bt20m FX loss and gains from sales of assets and investments worth Bt13m—core earnings would be Bt400m, up 150% YoY but down 4% QoQ. The net and core profits exceeded our estimates by 10% and 8%, respectively, thanks to greater revenue and lower SG&A expenses than modeled. GM was 22.9%, close to our assumption.
Result highlights
The hefty YoY core earnings jump was led by SIM and SAMTEL. SIM reported a Bt210m core profit for 3Q13, up 840% YoY (but down 27% QoQ), thanks to a surge in smart phone sales volume, a higher average sales price and fatter GM. SIM’s average sales price was Bt2,889 (up by 82% YoY and 18% QoQ). Blended GM was 22.8% (17.5% in 3Q12 and 27.6% in 2Q13)—the details are in our SIM report.
SAMTEL posted Bt239m in core earnings for 3Q13, up by 63% YoY and 18% QoQ, led by greater revenue, better SG&A control and lower tax expenses. Revenue rose by 41% YoY and 13% QoQ, driven by Bt1.3bn in income from contracts signed before YE13 and Bt1.3bn in income from contracts signed in 9M13 (details in our SAMTEL report).
Samart Engineering (SE), Kampot Power Plant (KPP) and One to One Contacts (OTO) posted YoY declines in their 3Q13 bottom-lines. CATS’ profit jumped 46% YoY on a 19% rise in the number of flights. KPP’s earnings dived 26% YoY due to a FX loss. OTO’s profit plunged 21% YoY. SE posted a Bt11m loss because of a one-time provision. Vision and Security saw an Bt8m profit (against losses in 2Q13 and 3Q12).
Outlook
We forecast a Bt350m net profit for 4Q13, up 35% YoY but down 11% QoQ, led by earnings rises at SIM (up 147% YoY but flattish QoQ) and SAMTEL (up by 78% YoY and 12% QoQ). SIM’s 4Q13 drivers are greater smart phone sales volume (400k units, up 18% YoY), a modest GM rise to 23% (from 21.6% in 4Q12) and a higher mean sales price (Bt2,900, up 30% YoY). SAMTEL’s 4Q13 drivers are revenue expansion, led by Bt2bn in income from existing projects and Bt1bn in income from new contracts expected to be signed in 4Q13.
What’s changed?
We maintain our FY13 core profit forecast unchanged. Because we have revised down our SAMTEL YE14 target price by 5% to Bt26, our SAMART sum-of-the-parts-derived target price dips 3% to Bt32.50.
Recommendation
Our BUY rating stands, premised on solid FY13-14 earnings growth profile.