Intouch Holdings

Intouch Holdings Plc (INTUCH)

Investment thesis

INTUCH arranged an urgent meeting in which executives of ADVANC, THCOM and INTUCH clarified key operational and regulatory issues/concerns to analysts and fund managers. We expect some positive feedback from the event. However, some regulatory issues, such as the further delay to the NBTC’s one-year moratorium on 4G auctioning, are challenges for ADVANC in FY15.
Given the firms’ recent share price retreats, their valuations and dividend yields are now more attractive for re-entry. Our BUY ratings stand for ADVANC (Bt250), THCOM (Bt46) and INTUCH (Bt101). We have trimmed our INTUCH FY14 earnings forecast by 7% and its NAV-based target price 4% to Bt101 to factor in our 7% cut to our ADVANC FY14 profit projection and 4% target price downgrade (to Bt250).
ADVANC—no spectrum shortage problem for next 12-18 months
Mr Somchai Lertsuthiwong, the new CEO, said that he will lead the long-term sustainable marketing approach by focusing on securing existing clients and building data revenue. He expressed confidence in the 4G auction going ahead next year and confirmed that ADVANC’s 15MHz of 2.1GHz bandwidth is sufficient to cater to more than 50m subscribers during the next 12-18 months. Its 97% existing 3G-2.1GHz coverage with 19,000 base stations (near 2G coverage) will offer more stability than peers, he said.
Moreover, increases of small cells and the one-year temporary use of 1800MHz spectrum for 3G/4G services will alleviate signal quality issues in heavy call traffic areas. The 12- to 18-month delay to 4G auctioning will not impact migration, CAPEX or marketing plans.
THCOM—supply shortage with high broadcasting demand
Ms Suphajee Suthumpun, the CEO, confirmed strong demand from broadcasters tied to the “must-carry” rule for digital terrestrial TV channels and HD broadcasting by True Visions and PSI. Moreover, broadband data consumption growth in the Asia-Pacific region remains robust. NBN of Australia will purchase additional bandwidth from IPSTAR soon. Thaicom 7’s presales will reach 100% before its launch.
INTUCH—high confidence in 4G auction over next 12-18 months
Mr Somprasong Boonyachai, the group CEO, said that he is confident 4G auctioning will go ahead next year. He ruled out the option of delaying auctioning further because the proceeds of the auctioning will benefit the country. However, if there were to be further delays beyond 18 months, ADVANC has a back-up plan to deal with the bandwidth issue. One option is to roam on TOT’s 2.1GHz bandwidth. Somprasong said that TRUE’s recruitment of China Mobile as a strategic partner will make it act more professionally and rationally than before