Thaicom

Thaicom Plc (THCOM)

Investment thesis
The CEO urgently arranged an analyst meeting last Friday to clarify
that GRAMMY and CTH will continue to lease THCOM’s transponders
even after they form their strategic partnership. We feel more confident
about sustained strong broadcasting demand in FY14-15 following the
analyst meeting. Our BUY rating stands, premised on a solid FY14
earnings profile and scope for upside from Thaicom 7, debt refinancing
and new IPSTAR markets in 2H14.
Solid broadcasting demand for Thaicom 5 and 6
After discussions with CTH and GRAMMY executives, the CEO
confirmed that the two firms have no policy to reduce their usage of
THCOM’s transponders. GRAMMY and CTH currently deploy six and
four THCOM transponders, respectively. The CEO also clarified that
although small digital/satellite TV operators might shut down operations
in the future, due to losses, True Visions and PSI will take the vacant
transponder capacity. Note that one transponder can serve 12-14
standard-definition (SD) channels or 3-4 high-definition (HD) channels.
True Visions may need at least one more transponder to cater to its
new HD channels. PSI is now expanding its coverage to Laos and
Cambodia and requests additional transponders from THCOM.
Currently, clients for 5-6 transponders—2-3 new clients and 3-4
existing clients—are queuing up. Moreover, the 36 must-carry digital
TV channels—12 public and 24 commercial channels—will use four
transponders (SD channels) or 6-8 transponders (SD plus some HD
channels and the digital TV content feeds) when all 36 channels are
commercially launched in 4Q14.
About 50% of Thaicom 7’s capacity is pre-sold
The CEO said Thaicom 7’s launch date of August 26, 2014 might be
delayed to September. Its presales are now 50%, up from 40% at end-
May 2014. We expect presales to reach 60% before the orbital launch
in Aug-Sept and 70-80% by YE14. Thaicom 7 has 14 C-band
transponders up for sale with a targeted overseas client ratio
(broadcasting to broadband Internet) of 49:51.
IPSTAR’s greater usage by NBN in 2H14
The Australian NBN client requested additional capacity to provide
higher speeds and will increase its deployment by another 9,000 users
(after surpassing the contracted minimum requirement of 48,000
users). The increased revenue from a Japanese IPSTAR client will
come from end-to-end solutions, such as high-speed WiFi and system
integration projects with Softbank. The Malaysian MEASAT client will
have until YE14 to decide if it will take the remaining 50% of IPSTAR
bandwidth capacity that is allocated to Malaysia.