Thaicom

Thaicom Plc (THCOM)

The merger between CTH and GRAMMY has no impact on THCOM’s
fundamental factors since the two companies will still keep their
current capacity booking with THCOM for future service expansion.
Likewise, Temasek’s possible reduction of stake in INTUCH will not
affect THCOM’s administrative policy. As share price has weakened, it
is time to accumulate.
- No impact from CTH+GRAMMY merger and Temaesk stake cut
THCOM clarified at the analyst meeting two factors the market has been
concerned. 1) Regarding the merger between CTH and GRAMMY for satellite
pay TV business, which might result in a reduction of the two companies’
capacity with two satellite of THCOM (Thaicom 5 and Thaicom 6) from 13% at
present, the company confirmed that both CTH and GRAMMY would not reduce
their current capacity with THCOM and would keep it for future service
expansion and even in case that the two companies reduce their capacity, there
are still many other operators waiting in line, especially TRUE that needs the
capacity for upgrading its airing from standard definition (SD) to high definition
(HD). 2) For a possible reduction of stake in Asia by Temasek, which might
affect INTUCH, in which Temasek has 41.6% stake, and THCOM, as a
subsidiary of INTUCH (41.14% stake), the share reduction is still inconclusive
and if it does happen, an effect on THCOM’s business policy is not significant
since it is operating independently by Thai directors.
- Bright business outlook maintained
We maintain a positive outlook toward THCOM. The profit is projected to grow
remarkably since 2Q14 onward because the company has temporarily stopped
recognizing THCOM 6 rental expense since March 2014 and the utilization rate
of Thaicom 6 will increase from digital TV operators that have to rent satellite
capacity for airing their programs in compliance with the NBTC’s rule. For the
second half of the year and 2015, THCOM will benefit from a new satellite,
Thaicom 7; although Thaicom 7 is not giving television broadcasting service, it
will be able to generate profit right after its operation because THCOM will
migrate clients of non-television-broadcasting service from Thaicom 5 to
Thaicom 7, giving way for Thaicom 5 to better serve demands for television
broadcasting. As a result, current capacity booking of Thaicom 7 is as much as
50%, already exceeding the breakeven point of 40-45%. Additionally, another
satellite, Thaicom 8, will be launched (still not included in our forecast) in 2016
to support the currently insufficient broadcasting service since the new airing
standard requires substantially larger capacity.
- Remain strong fundamentally. Buy
THCOM’s fundamental factors remain strong, so we maintain the fair value at
B50/share. As the share price has declined from negative sentiment until there
is a 39% upside now, we recommend BUY.