Jasmine International

Jasmine International Plc (JAS)

- 4Q13 profit unchanged qoq due to increasing extraordinary expense
JAS's 4Q13 net profit was at B757m, staying unchanged qoq, as a result
of B35m extraordinary expense (B19m Fx loss and B15m impairment of
assets), versus B7m extraordinary loss in 3Q13. Excluding extraordinary
items, 4Q13 normalized profit was B791m, growing 3.8%qoq. FY2013
net profit was B3bn, growing 48%yoy, and FY2013 normalized profit
was B3.02bn, growing 49%yoy but 5% below our expectation. 4Q13
service revenue grew by 4.3%qoq to 2.9bn as the number of hi-speed
internet subscribers rose by 4.6%qoq (60,000 subscribers/year).
However, additional investment on the network lowered gross profit
margin from 59.1% in 3Q13 to 58.6% in 4Q13, decelerating from
previous quarters. At the same time, 4Q13 interest income increased
three folds qoq, and 4Q13 effective tax rate dropped from 16.3% in
3Q13 to 15% (currently asking for causes), benefiting JAS.
- Normalised profit to grow, but net profit to drop if increase provision
We project FY2014 normalized profit to grow further. The number of hispeed
internet subscribers is expected to reach the target of 200,000-
300,000 subscribers/year, as there would be more subscribers who will
set-up home-wifi at home for smartphone. FY2014 normalized profit is
projected to leap by 35%yoy. However, for FY2014 net profit forecast,
we make a conservative assumption that B3.3bn extraordinary loss
(debt provision) would be recognized. JAS previously made a haircut
during its business rehabilitation plan. The court overturned the plan
afterward, so JAS might have to make a debt provision in case that the
debtor demands repayment. Currently, JAS has no plan make the
provision as the debtor has not demanded repayment. Under the
conservative assumption, we project FY2014 net profit at B838m,
contracting 72%yoy.
- Price already absorbs bad news. Good to speculate on infrastructure fund
JAS's share price has declined by 23% after the court overturned the
rehabilitation plan. Current share price has 22% upside, as the bad news
has been absorbed already. The provision might be made, but the
probability is low. We recommend "HOLD". However, with low downside,
it is advisable to speculate on the news of infrastructure fund
establishment (completed at end-1H14). JAS's FY2013 dividend will be
paid at B0.25 (3% dividend yield). XD date is 21 February 2014.