Thaicom

THCOM plans to invest B5bn in both core and secondary businesses this year. The company revealed that it will pay B2.0bn to extend the license of its mobile business in Laos (THCOM holds 24.99%) by another 25 years (initially expires in 2021) and invest another B3bn in the core business, particularly Thaicom8 that will start its commercial run in 2Q16. THCOM's revenue is still expected to grow by 5-7%yoy, mainly from the two satellites launched last year: Thaicom6 (currently 64% utilization rate; another 36% in Africa) and Thaicom7 (full capacity booking; currently 50% utilization rate but rising to 100% by the end of this year). 

- More confident for steady earnings growth  

Extension of the license of the mobile business in Laos would significantly benefit THCOM. Since the mobile business is stable and the company has already won 48% market share, the business would boost its profit by over B150m/year and ensure strong growth for the long run. In addition, after operating the mobile business for years, THCOM would have new opportunities to unlock added value by having the mobile business listed in the exchange market, which would boost the company’s market capitalization. For short-term benefit, although THCOM's revenue is not likely to grow significantly this year, its profit is likely to leap more rapidly since Thaicom7's utilization rate has exceeded the breakeven point of 50% already, which means revenue from higher utilization rate will be counted as profit. THCOM's net profit is expected to jump by 30% to B2.1bn in 2015 and grow further in 2016 because income from Thaicom7 (100% utilization rate) would be booked for a full year and new Thaicom8 would generate income from 2Q16 on; the company does not launch a satellite until its capacity booking exceeds the breakeven point. Overall, THCOM's net profit is projected to grow by at least 15%yoy in 2016; excluding Thaicom8, its FY2016 earnings would rise by 12%yoy. 

- Promising with limited downside  

With promising business, steadier income from the mobile business in the long run, and 43% upside, we reiterate BUY.