Intuch Holding

Intuch Holding Plc (INTUCH)   

- 4Q14 normalized profit grows from ADVANC    

 

FY2014 net profit stood at B14.7bn, stabilizing from FY2013 as projected. 4Q14 net profit was reported at B3.65bn, decreasing 3.5%qoq. However, excluding extraordinary item, which reversed from net income of B131m in 3Q14 to an expense of B23m in this quarter, normalized profit could grow 1.0%qoq to B3.67bn mainly because of ADVANC. Shared profit from ADVANC (INTUCH holds 40.45% stake) increased following a 1.9%qoq rise in ADVANC’s profit as a result of increasing customer migration from a 2G system, which has regulatory cost of 25%, to a 3G system, which has regulatory cost of 5.25%, from 88% of total subscribers in 3Q14 to 92% in this quarter, as well as a benefit from a high season. The advantage, nevertheless, was partly negated by a 4.4%qoq decrease in THCOM’s normalized profit (INTUCH holds 41.14% stake, consolidating financial statement) because of rising financial cost (mostly fee from the launch of low-rate bonds to replace the current ones). Operating income and expense stayed unchanged from the prior quarter because a new satellite, Thaicom7, has commenced operation for only one month and thus has slight related income and expense.   

 

- Two subsidiaries to boost 2015 profit growth to 16%   

 

INTUCH’s profit growth will be promising this year, thanks to bigger shared profit from ADVANC as a result of the following factors: 1) service revenue will grow following the economic rebound; 2) regulatory cost will decrease for a full year after more than 90% of ADVANC subscribers has been migrated to a 3G system; 3) the company will stop recognizing amortization cost of almost B3bn/quarter for 2G equipment after the 2G concession ends on September 15, 2015. In addition, THCOM’s profit will grow from full-year operations of two new satellites, which are Thaicom6 (commencing operation since February 2014, with current usage of 68%, versus a breakeven point of 50%) and Thaicom7 (commencing operation since November 2014, with a current occupancy rate of 50% which would be fully used by the end of 1Q15, versus a breakeven point of 40%). Consequently, we maintain FY2015 profit forecast of B17bn or the growth of 16%. 

 

- High upside, dividend yield above 6% p.a.    

 

2015 fair value is B113 (derived by NAV method, based on ADVANC’s fair value of B285 and THCOM’s fair value of B51), implying 35.4% upside. Dividend yield can be expected above 6.0% p.a. We reiterate BUY. INTUCH announced 2H14 dividend at 

 

B2.23 (yield of 2.7%); XD date is March 31, 2015.