Samart Corporation

Samart Corporation Plc (SAMART)

DTTV rewards expected in 1Q14F. The NBTC successfully held the auction for Digital
Terrestrial Television (DTTV) channels last week and expects public broadcasts to begin
~Feb-Mar 2014. We look for two big activities in 1Q14: the distribution of new set-top
boxes for DTTV and the upgrade of broadcasting networks to support the DTTV system.
We believe SAMART will benefit from both.
 Set-top box business: Of the estimated 22mn households in Thailand, ~36%
(according to AGB Nielsen Media Research), or ~8mn, currently use antennas to
receive terrestrial TV signals while the rest watch TV using satellite or cable TV
hookups. In order to receive DTTV signals, these 8mn households need either
new DTTV set-top boxes or satellite/cable TV (which are likely to rebroadcast
DTTV channels). The NBTC will subsidize DTTV set-top boxes by distributing cash
coupons, which initial guidance from the NBTC suggests will be ~Bt700 (to be
finalized by March), to every household. This appears to be a big market and
SAMART, with long years of experience in the antenna, satellite dish and settop
box businesses under Samart Engineering Co. Ltd., is ideally positioned to
benefit. It is ahead of the game, having already launched DTTV set-top boxes at
a cost of Bt1,155 per unit. Every 1mn units sold adds Bt58-166mn (or 3.5-7% of
2014F) to SAMART earnings, assuming a net margin of 5-10%.
 Network rollout: The NBTC issued multiplexer licenses to Channels 5, 7, 11
(NBT) and Thai PBS. All four need to upgrade their broadcast systems to
support DTTV and SAMTEL is a lead candidate to provide this.
Positive news flow in 1Q14F: Buy with Bt24 TP. With the DTTV business going live
in 2014, we expect to see positive news flow with regards to set-top boxes and
network upgrades in 1Q14F. Its other businesses continue to look good, especially the
smartphone business, which we expect to get back on track after the temporary
slowing from the protests in 4Q13. We reiterate Buy and Bt24 TP based on SOTP
consisting of: 1) Bt8.8/share for SAMTEL based on its Bt21 TP, 2) Bt12/share for SIM
based on TP of Bt4.8 and 3) Bt4.1/share from non-listed companies (based on 2xBV).