Thaicom

Thaicom Plc (THCOM)  

Core profit exceeded our model 

THCOM reported a Bt425m net profit for 4Q14, up 48% YoY and 52% QoQ. Excluding a Bt23m FX loss in 4Q14, core profit would be Bt448m, up 27% YoY but down 4% QoQ. Net profit exceeded our estimate by 33%, on lower-than-assumed FX loss. Core profit beat our model by 12% due to the slightly higher revenue and service costs and tax expenses lower than our assumptions. Revenue exceeded our model by 2%, led by greater Lao Telecom (LTC) revenue than we projected. Gross profit (GP) was 10% above our estimate. After-tax profit was 11% above our model. GM was 42.3%, above our estimate of 39%.

Result highlights 

The solid YoY core profit rise was led by revenue from Thaicom 6 (starting Feb 2014), partial revenue from Thaicom 7 (starting mid-Nov 2014), greater bandwidth sales to NBN Australia (related to the capacity upgrade and the bandwidth deployment to an additional 9,000 users) and the stronger LTC revenue and profit (associated with higher net subscriber additions and ARPU). The modest QoQ core profit slippage was due to higher SG&A expenses linked to staff and marketing. Thaicom 6’s mean utilization was 68% in 4Q14, stable QoQ and up from 59% in 2Q14.

Conventional satellite revenue rose 17% YoY and 3% QoQ, driven by Thaicom 6, the partial revenue of Thaicom 7 and greater value-added services. IPSTAR bandwidth sales rose 5% YoY (but fell 4% QoQ) on greater usage by NBN Australia (starting 3Q14). LTC’s revenue jumped 29% YoY and 10% QoQ on greater subscribership and ARPU. The GP of conventional satellites rose 26% YoY and 3% QoQ. The GP of IPSTAR fell 3% YoY and 12% QoQ. The GP of the telephone unit jumped 69% YoY and 14% QoQ. 

Outlook

Our preliminary forecast is a Bt450m core profit for 1Q15, up 30% YoY (due to the gradual increase of revenue from Thaicom 7, greater NBN usage of IPSTAR bandwidth and higher LTC earnings) and flattish QoQ (due to the full-quarter recognition of a Thaicom 7 depreciation expense, which should offset the rise in revenue).  

What’s changed? 

We maintain our FY15 core profit forecast and our YE15 target price unchanged at Bt54. 

Recommendation

Our BUY rating stands, premised on solid FY15 core earnings growth, led by the full-year revenue of Thaicom 7 and greater LTC earnings. The scope for upside will come from the potential increased bandwidth usage of MEASAT (Malaysia), greater IPSTAR bandwidth sales in India, Indonesia and Philippines and of Thaicom 6’s remaining bandwidth in Africa.