Thaicom

Thaicom Plc (THCOM) 

- 4Q14 profit rebounds as expected   

 

THCOM's FY2014 net profit was B1.6bn, rebounding 42%yoy (as expected). 4Q14 net profit was B425m, jumping 52.4%qoq since extraordinary expense decreased by B167m in 4Q14, versus extraordinary expense of B190m in 3Q14 (mainly impairment loss, which was not booked in 4Q14). However, excluding extraordinary items, 4Q14 normalized profit slipped 4%qoq (worse than expected) as a result of higher interest expense (mainly fees from issuance of new low-interest bonds replacing the old bonds). Revenue and operating cost (cost of service and SG&A) stayed unchanged from 3Q14; revenue and expense involving with Thaicom 7 were still low since Thaicom 7 has been launched for just one month. 

 

- Thaicom 7 to boost FY2015 profit by 29%  

 

THCOM's profit is expected to be strong in 2015, likely to improve from 4Q14 and grow near B500m/quarter in 1H15 thanks to higher revenue since Thaicom 7's occupancy rate has risen near the capacity booking of 50% in 1Q15 (mainly non-broadcast clients migrated from Thaicom 5), already exceeding the breakeven point of 40%. There are many additional positive factors in 2H15. Thaicom 7's occupancy rate is expected to rise above our projection of 70% at the end of 2015 since THCOM has been accelerating negotiation on sales of satellite capacity, probably reaching 100%. THCOM is currently working on sale negotiation with iPSTAR (6.2% capacity) and MEASAT (first 50% capacity); if the deals are a success, it would have a larger upside than the deal in Malaysia (50% capacity). After the conclusion on the two positive factors is made at the meeting on February 23, we may revise up THCOM's FY2015 earnings forecast to B2.0bn, growing 29%. 

 

- Share price not absorbs strong growth yet. Reiterate BUY   

 

THCOM's earnings are projected to continue growing remarkably, and the fair value implies 39.7% upside. We reiterate BUY.