Thaicom

Thaicom Plc (THCOM) 

Investment thesis

THCOM’s FY15 earnings profile is solid, led by Thaicom 7 revenue, greater LTC revenue and increased bandwidth usage by MEASAT (Malaysia). The forecast FY15-20 earnings CAGR is 12%, led by Thaicom 8 (FY16-17), Thaicom 9-11 (FY17 onward) and IPSTAR in India, Malaysia, Indonesia and the Philippines. We have cut our FY14 core profit estimate by 3% to Bt1.73bn to reflect a diminished expectation for 4Q14 core earnings. Our BUY rating stands.

Insights into 4Q14—a solid YoY core profit rise 

Our model indicates a Bt320m net profit for 4Q14, up by 12% YoY and 15% QoQ. Stripping out an Bt80m FX loss, core profit would be Bt400m, up 14% YoY but down 15% QoQ. The new assumed core profit is lower than our previous forecast of Bt450m, due to the absence of Thaicom 7 revenue (we had earlier assumed Thaicom 7 receipts in 4Q14). The assumed YoY core profit rise is due to revenue from Thaicom 6, starting Feb 2014, greater bandwidth sales to NBN Australia related to a capacity upgrade and additional bandwidth deployment to 9,000 users (starting 3Q14) and greater earnings at LTC. 

We assume that Thaicom 6’s mean utilization rate was 68% in 4Q14 (stable QoQ and up from 59% in 2Q14). The QoQ core profit drop was led by the recognition of depreciation expenses for Thaicom 7, starting mid Nov 2014 (Bt44m in 4Q14). Thaicom 7 will start booking revenue in 1Q15. We estimate that 4Q14 conventional satellite revenue increased by 15% YoY and 2% QoQ, led by Thaicom 6 and higher valued added service income. IPSTAR’s bandwidth revenue should have risen by 11% YoY and 2% QoQ, driven by NBN Australia. LTC income probably increased by 19% YoY and 2% QoQ, led by nonvoice receipts.       

IPSTAR progress in India, the Philippines & Indonesia in 2H15

Thaicom 7’s capacity is now fully booked and we expect its actual usage to ramp up from 20% in 1Q15 to 100% in 2H15. Thaicom 8 is scheduled for launch in 1H16 and the firm targets bookings of 50% by YE15 (12 transponders are allocated to Thailand and Indochina). The sale of Thaicom 6’s remaining capacity of 32% that is allocated to Africa is proving a challenge (THCOM is considering a single bulk sale). 

The firm will push IPSTAR bandwidth sales in India, Philippines and Indonesia in 2H15 and plans to acquire an Australian firm in 2Q15 to accelerate IPSTAR bandwidth sales in that country. MEASAT has until end-March 2015 to decide whether to take up IPSTAR’s 1.2Gbps of remaining capacity allocated to Malaysia (a total of 2.4Gbps is allocated to Malaysia). THCOM is also exploring the possibility of bulk IPSTAR sales in India.