Thaicom

Thaicom Plc

Core profit slightly below estimate
THCOM reported a Bt320m net profit for 3Q13, up 68% QoQ and a turnaround from a Bt107m net loss in 3Q12. Excluding a Bt46m FX loss in 3Q13 and other extra items in 3Q12 and 2Q13, core profit would be Bt366m, up by 306% YoY and 1% QoQ. Net earnings were 10% below our projection, due to a greater FX loss than assumed. Core profit was 4% below our estimate—service and tax expenses beat our model.
Result highlights
The YoY core profit jump was due to the absence of recurring Mfone losses, greater conventional satellite and IPSTAR revenues, lower IPSTAR service costs and a decline in interest expenses after a debenture repayment in Nov 2012. The marginal QoQ core profit rise was thanks to stronger revenue offsetting the effect of higher tax expenses and services costs.
Revenue from conventional satellites rose by 22% YoY and 23% QoQ, led by higher value-added service income at Thaicom 5 and new receipts from interim capacity at the 78.5E slot, starting Aug 2013 (ahead of Thaicom 6’s launch in Dec 2013). IPSTAR bandwidth sales rose by 15% YoY and 9% QoQ, led by greater usage in Australia, Thailand, Malaysia and India. Service costs jumped 19% QoQ with the lease of an AsiaSat satellite as interim capacity. Media revenue shot up by 35% YoY and 134% QoQ on greater pay-TV subscribership.
The gross profit of conventional satellites dipped by 4% YoY and 2% QoQ, due to interim capacity leasing costs (the net margin of providing interim capacity was thin in 3Q13). The GP of IPSTAR jumped by 81% YoY and 30% QoQ, due to lower equipment costs. The media unit turned around to a Bt13m gross profit from a Bt7m gross loss in 3Q12.
Outlook
Management guides for FY14 top-line growth of 13-15%, led by a full year of receipts from Thaicom 6 and IPSTAR China and six months of Thaicom 7 revenue. NBN in Australia has increased its IPSTAR bandwidth usage above its minimum commitment. THCOM signed an additional bandwidth agreement with Antrix, an existing Indian client. The firm will soon ink new bandwidth presales agreements with African clients. Thaicom 6 has presold 66% of its capacity. We estimate a Bt331m net profit for 4Q13, up by 167% YoY and 3% QoQ.
What’s changed?
Our FY13 bottom-line forecast declines 10% to Bt1.17bn, due to a greater FX loss assumption, but our FY13 core earnings projection rises12% to Bt1.24bn to factor in a higher 9M13 core profit than assumed.
Recommendation
We have a BUY call, premised on a solid FY14 core earnings growth.