Thaicom - Global Alliance Partners
Thaicom Buy (2017E TP Bt33.00)
Company Update
Close Bt19.70
ICT
Earnings upgrade/Earnings downgrade/Overview unchanged
November 11, 2016
3Q16 core earnings below expectation Price Performance (%)
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
1.878
1.860
‐1%
6.5%
KT ZMICO vs. consensus Share data Reuters / Bloomberg
THCOM.BK/THCOM TB
Paid‐up Shares (m)
1,095.99
Par (Bt)
5.00
Market cap (Bt bn / US$ m)
22.00/614.00
Foreign limit / actual (%)
40.00/16.15
52 week High / Low (Bt)
30.25/16.00
Avg. daily T/O (shares 000) NVDR (%)
5,491.00 7.23
Estimated free float (%)
51.25
Beta
0.89
URL
www.thaicom.net
CGR Anti‐corruption
Level 4 (Certified)
Waraporn Wiboonkanarak Analyst, no. 2482 [email protected]
Need time for strong earnings recovery THCOM reported a weak operation in 3Q16 as expected and this momentum trend will continue in 4Q16. We expect to see earnings recovery in 2017E, albeit at a slow pace. The potential new sales and the clarification of overhanging regulatory issues, expected to be seen in 1H17, will unlock its share price performance. Thus, we maintain our BUY rating. 3Q16 core profit weakened THCOM reported a net profit of Bt434mn (EPS Bt0.40) in 3Q16, increasing 64%YoY. Stripping out Fx gain, its core earnings fell 47%YoY and 27%QoQ to Bt355mn. This was in line with the market estimate but below our expectation by 5% owing to higher‐than‐expected interest and tax expenses. The weak results both YoY and QoQ were mainly due to a lower margin from the satellite business. Conventional satellite revenue fell 14%YoY and 1%QoQ on the business termination of CTH. Revenue from IPSTAR dropped 9%YoY and 8%QoQ owing to the decrease of bandwidth usage from NBN, price adjustments for some customers according to new contracts and the decrease of satellite equipment sales. This coupled with full cost recognition regarding Thaicom8 squeezed the satellite margin to 36.9%. The contribution from internet and media business decreased YoY on lower revenue despite effective cost management. Core business to lose earnings momentum in 4Q16E THCOM’s satellite operation will tend to weaken further in 4Q16E. We expect revenue from satellite services to deteriorate QoQ to reflect the full‐quarter impact from the ceasing of CTH’s operation while no new orders will flow in. On the other hand, costs will tend to accelerate due to higher revenue sharing to 22.5% (from 20.5%) for concession‐based revenue. We preliminarily estimate Bt353mn core earnings in 4Q16E, flat QoQ, thanks to seasonal recovery of shared profit from the telephone business abroad. This implies that our 2016E core earnings forecast will be cut by 12% to Bt1.89bn. Our 2017E‐2018E earnings models are fine‐ tuned with insignificant changes. Positive signal on overhanging regulatory issues The government’s plan to reform the satellite industry is one of the key priorities for the new Digital Economy Ministry’s permanent secretary. The legal framework on satellite services, the extension of satellites in orbit after the expiration of concessions and bringing Thaicom7 and 8 into the concession regime are to be considered. We expect these regulatory challenges for THCOM to be resolved within 1H17. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm EPS (Bt) Norm EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 12,065 1,601 1.46 1.71 24.2% 0.65 15.77 2014 23.79 8.67 2.20 1.9% 11.5% 38.2%
2015 12,454 2,122 1.94 2.11 23.5% 0.65 16.53 2015 14.98 6.66 1.75 2.2% 13.3% 37.0%
2016E 11,669 2,034 1.86 1.72 ‐18.5% 0.74 17.74 2016E 10.61 5.33 1.11 3.8% 10.3% 41.4%
66 (0) 2624‐6273 REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2017E 12,407 2,167 1.98 1.98 15.2% 0.79 18.98 2017E 9.96 4.25 1.04 4.0% 11.0% 23.4%
2018E 12,510 2,215 2.02 2.02 2.2% 0.81 20.22 2018E 9.75 3.42 0.97 4.1% 10.5% ‐0.7%
Figure 1: Earnings review Profit and Loss Statement (Btmn) Fiscal Year‐Ended Dec. Revenue Gross Profit EBITDA Share of profit from affiliate Interest Expense Other income Net profit (loss) Core profit (loss) Reported EPS (THB) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Debt to equity (x) BVPS (Bt) ROE (%)
3Q15 3,147 1,323 1,518 (13) 86 37 265 674 0.24 42.0% 48.2% 8.4% 1.56 8.80 0.86 15.65 3.9%
2Q16 2,902 1,168 1,405 62 73 43 591 592 0.54 40.3% 48.4% 20.4% 1.91 10.23 0.85 16.60 3.2%
3Q16E 2,791 1,034 1,297 51 108 39 434 355 0.40 37.1% 46.5% 15.5% 2.77 4.55 0.70 16.94 1.9%
%QoQ ‐3.8% ‐11.5% ‐7.7% pm 48.4% ‐10.7% ‐26.6% ‐40.1% ‐26.6% ‐3.2% ‐2.0% ‐4.8%
%YoY ‐11.3% ‐21.8% ‐14.6% ‐481.4% 25.7% 3.5% 63.5% ‐47.4% 63.5% ‐5.0% ‐1.8% 7.1%
9M16E 8,903 3,618 4,220 154 250 128 1,725 1,529 1.57 40.6% 47.4% 19.4% 2.77 8.28 0.70 8.2% 16.94 1.9%
2.0%
%YoY ‐2.8% ‐2.7% ‐0.8% 39.5% 0.2% 18.5% 25.2% ‐6.7% 25.2%
2016E 11,669 4,602 5,565 238 358 175 2,034 1,872 1.86 39.4% 47.7% 17.4% 1.93 7.53 0.81 8.2% 17.74 10.3%
YTD %YoY (% of 2016E) ‐6.3% 76.3% ‐9.7% 78.6% ‐3.7% 75.8% 22.8% 64.8% 17.0% 69.8% 13.8% 73.3% ‐4.1% 84.8% ‐21.4% 81.7% ‐4.2% 84.8% ‐1.5% 1.3% 0.4%
7.3%
Source: Company and KT Zmico Research Figure 2: Earnings revision Ended Dec Revenue (Btmn) EBITDA (Btmn) Net profit (Btmn) % growth Core profit (Btmn) % growth Core EPS (Bt) Core EPS growth (%) Gross margin (%) SG&A exp to sales (%)
Previous 12,177 5,795 2,227 2.9% 2,148 5.0% 1.96 ‐5.4% 40.6% 17.0%
2016E New 11,669 5,565 2,034 ‐4.1% 1,882 ‐9.5% 1.72 ‐18.5% 39.4% 17.0%
%chg ‐4.2% ‐4.0% ‐8.7% ‐7.0% ‐12.4% ‐14.5% ‐12.4% ‐13.1% ‐1.2% 0.1%
Previous 13,057 6,265 2,188 ‐2.5% 2,188 ‐2.5% 2.00 ‐2.5% 39.0% 16.6%
2017E New 12,407 6,226 2,167 6.6% 2,167 15.2% 1.98 15.2% 39.4% 16.3%
%chg ‐5.0% ‐0.6% ‐0.9% 9.1% ‐0.9% 17.7% ‐0.9% 17.7% 0.5% ‐0.3%
Previous 13,308 6,340 2,258 3.2% 2,258 3.2% 2.06 3.2% 39.4% 17.0%
2018E New 12,510 6,273 2,215 2.2% 2,215 2.2% 2.02 2.2% 39.6% 16.5%
%chg ‐6.0% ‐1.1% ‐1.9% ‐1.0% ‐1.9% ‐1.0% ‐1.9% ‐1.0% 0.2% ‐0.5%
Source: KT Zmico Research Figure 3: SOTP‐based target price for THCOM Company Holding stake (%) Satellite business CSL LTC
42.07% through DTV services 24.99% (holding through Shenington)
SOTP‐based target Source: KT Zmico Research
Valuation Method DCF (WACC 8.3%) DDM (ke 12%) PER
Value to THCOM (Bt) 26.95 1.36 1.73 30.04
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
25.00 +2S.D.
20.00
15.00 Average
10.00 ‐0.5S.D.
5.00 6.00
‐1S.D.
Jan‐06 May‐06 Sep‐06 Jan‐07 May‐07 Sep‐07 Jan‐08 May‐08 Sep‐08 Jan‐09 May‐09 Sep‐09 Jan‐10 May‐10 Sep‐10 Jan‐11 May‐11 Sep‐11 Jan‐12 May‐12 Sep‐12 Jan‐13 May‐13 Sep‐13 Jan‐14 May‐14 Sep‐14 Jan‐15 May‐15 Sep‐15 Jan‐16 May‐16 Sep‐16
Jan‐10 May‐10 Sep‐10 Jan‐11 May‐11 Sep‐11 Jan‐12 May‐12 Sep‐12 Jan‐13 May‐13 Sep‐13 Jan‐14 May‐14 Sep‐14 Jan‐15 May‐15 Sep‐15 Jan‐16 May‐16 Sep‐16
Figure 4: PER and EV/EBITDA band
PER (x) 12.00
10.00
EV/EBITDA (x)
+1S.D.
8.00 +1S.D. Average
4.00 ‐1S.D.
2.00
‐ ‐
Source: THCOM and KT Zmico Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, PACE, TPOLY, M‐CHAI, TFD, SUTHA.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 4
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
Company Update
Close Bt19.70
ICT
Earnings upgrade/Earnings downgrade/Overview unchanged
November 11, 2016
3Q16 core earnings below expectation Price Performance (%)
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
1.878
1.860
‐1%
6.5%
KT ZMICO vs. consensus Share data Reuters / Bloomberg
THCOM.BK/THCOM TB
Paid‐up Shares (m)
1,095.99
Par (Bt)
5.00
Market cap (Bt bn / US$ m)
22.00/614.00
Foreign limit / actual (%)
40.00/16.15
52 week High / Low (Bt)
30.25/16.00
Avg. daily T/O (shares 000) NVDR (%)
5,491.00 7.23
Estimated free float (%)
51.25
Beta
0.89
URL
www.thaicom.net
CGR Anti‐corruption
Level 4 (Certified)
Waraporn Wiboonkanarak Analyst, no. 2482 [email protected]
Need time for strong earnings recovery THCOM reported a weak operation in 3Q16 as expected and this momentum trend will continue in 4Q16. We expect to see earnings recovery in 2017E, albeit at a slow pace. The potential new sales and the clarification of overhanging regulatory issues, expected to be seen in 1H17, will unlock its share price performance. Thus, we maintain our BUY rating. 3Q16 core profit weakened THCOM reported a net profit of Bt434mn (EPS Bt0.40) in 3Q16, increasing 64%YoY. Stripping out Fx gain, its core earnings fell 47%YoY and 27%QoQ to Bt355mn. This was in line with the market estimate but below our expectation by 5% owing to higher‐than‐expected interest and tax expenses. The weak results both YoY and QoQ were mainly due to a lower margin from the satellite business. Conventional satellite revenue fell 14%YoY and 1%QoQ on the business termination of CTH. Revenue from IPSTAR dropped 9%YoY and 8%QoQ owing to the decrease of bandwidth usage from NBN, price adjustments for some customers according to new contracts and the decrease of satellite equipment sales. This coupled with full cost recognition regarding Thaicom8 squeezed the satellite margin to 36.9%. The contribution from internet and media business decreased YoY on lower revenue despite effective cost management. Core business to lose earnings momentum in 4Q16E THCOM’s satellite operation will tend to weaken further in 4Q16E. We expect revenue from satellite services to deteriorate QoQ to reflect the full‐quarter impact from the ceasing of CTH’s operation while no new orders will flow in. On the other hand, costs will tend to accelerate due to higher revenue sharing to 22.5% (from 20.5%) for concession‐based revenue. We preliminarily estimate Bt353mn core earnings in 4Q16E, flat QoQ, thanks to seasonal recovery of shared profit from the telephone business abroad. This implies that our 2016E core earnings forecast will be cut by 12% to Bt1.89bn. Our 2017E‐2018E earnings models are fine‐ tuned with insignificant changes. Positive signal on overhanging regulatory issues The government’s plan to reform the satellite industry is one of the key priorities for the new Digital Economy Ministry’s permanent secretary. The legal framework on satellite services, the extension of satellites in orbit after the expiration of concessions and bringing Thaicom7 and 8 into the concession regime are to be considered. We expect these regulatory challenges for THCOM to be resolved within 1H17. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm EPS (Bt) Norm EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 12,065 1,601 1.46 1.71 24.2% 0.65 15.77 2014 23.79 8.67 2.20 1.9% 11.5% 38.2%
2015 12,454 2,122 1.94 2.11 23.5% 0.65 16.53 2015 14.98 6.66 1.75 2.2% 13.3% 37.0%
2016E 11,669 2,034 1.86 1.72 ‐18.5% 0.74 17.74 2016E 10.61 5.33 1.11 3.8% 10.3% 41.4%
66 (0) 2624‐6273 REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2017E 12,407 2,167 1.98 1.98 15.2% 0.79 18.98 2017E 9.96 4.25 1.04 4.0% 11.0% 23.4%
2018E 12,510 2,215 2.02 2.02 2.2% 0.81 20.22 2018E 9.75 3.42 0.97 4.1% 10.5% ‐0.7%
Figure 1: Earnings review Profit and Loss Statement (Btmn) Fiscal Year‐Ended Dec. Revenue Gross Profit EBITDA Share of profit from affiliate Interest Expense Other income Net profit (loss) Core profit (loss) Reported EPS (THB) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Debt to equity (x) BVPS (Bt) ROE (%)
3Q15 3,147 1,323 1,518 (13) 86 37 265 674 0.24 42.0% 48.2% 8.4% 1.56 8.80 0.86 15.65 3.9%
2Q16 2,902 1,168 1,405 62 73 43 591 592 0.54 40.3% 48.4% 20.4% 1.91 10.23 0.85 16.60 3.2%
3Q16E 2,791 1,034 1,297 51 108 39 434 355 0.40 37.1% 46.5% 15.5% 2.77 4.55 0.70 16.94 1.9%
%QoQ ‐3.8% ‐11.5% ‐7.7% pm 48.4% ‐10.7% ‐26.6% ‐40.1% ‐26.6% ‐3.2% ‐2.0% ‐4.8%
%YoY ‐11.3% ‐21.8% ‐14.6% ‐481.4% 25.7% 3.5% 63.5% ‐47.4% 63.5% ‐5.0% ‐1.8% 7.1%
9M16E 8,903 3,618 4,220 154 250 128 1,725 1,529 1.57 40.6% 47.4% 19.4% 2.77 8.28 0.70 8.2% 16.94 1.9%
2.0%
%YoY ‐2.8% ‐2.7% ‐0.8% 39.5% 0.2% 18.5% 25.2% ‐6.7% 25.2%
2016E 11,669 4,602 5,565 238 358 175 2,034 1,872 1.86 39.4% 47.7% 17.4% 1.93 7.53 0.81 8.2% 17.74 10.3%
YTD %YoY (% of 2016E) ‐6.3% 76.3% ‐9.7% 78.6% ‐3.7% 75.8% 22.8% 64.8% 17.0% 69.8% 13.8% 73.3% ‐4.1% 84.8% ‐21.4% 81.7% ‐4.2% 84.8% ‐1.5% 1.3% 0.4%
7.3%
Source: Company and KT Zmico Research Figure 2: Earnings revision Ended Dec Revenue (Btmn) EBITDA (Btmn) Net profit (Btmn) % growth Core profit (Btmn) % growth Core EPS (Bt) Core EPS growth (%) Gross margin (%) SG&A exp to sales (%)
Previous 12,177 5,795 2,227 2.9% 2,148 5.0% 1.96 ‐5.4% 40.6% 17.0%
2016E New 11,669 5,565 2,034 ‐4.1% 1,882 ‐9.5% 1.72 ‐18.5% 39.4% 17.0%
%chg ‐4.2% ‐4.0% ‐8.7% ‐7.0% ‐12.4% ‐14.5% ‐12.4% ‐13.1% ‐1.2% 0.1%
Previous 13,057 6,265 2,188 ‐2.5% 2,188 ‐2.5% 2.00 ‐2.5% 39.0% 16.6%
2017E New 12,407 6,226 2,167 6.6% 2,167 15.2% 1.98 15.2% 39.4% 16.3%
%chg ‐5.0% ‐0.6% ‐0.9% 9.1% ‐0.9% 17.7% ‐0.9% 17.7% 0.5% ‐0.3%
Previous 13,308 6,340 2,258 3.2% 2,258 3.2% 2.06 3.2% 39.4% 17.0%
2018E New 12,510 6,273 2,215 2.2% 2,215 2.2% 2.02 2.2% 39.6% 16.5%
%chg ‐6.0% ‐1.1% ‐1.9% ‐1.0% ‐1.9% ‐1.0% ‐1.9% ‐1.0% 0.2% ‐0.5%
Source: KT Zmico Research Figure 3: SOTP‐based target price for THCOM Company Holding stake (%) Satellite business CSL LTC
42.07% through DTV services 24.99% (holding through Shenington)
SOTP‐based target Source: KT Zmico Research
Valuation Method DCF (WACC 8.3%) DDM (ke 12%) PER
Value to THCOM (Bt) 26.95 1.36 1.73 30.04
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
25.00 +2S.D.
20.00
15.00 Average
10.00 ‐0.5S.D.
5.00 6.00
‐1S.D.
Jan‐06 May‐06 Sep‐06 Jan‐07 May‐07 Sep‐07 Jan‐08 May‐08 Sep‐08 Jan‐09 May‐09 Sep‐09 Jan‐10 May‐10 Sep‐10 Jan‐11 May‐11 Sep‐11 Jan‐12 May‐12 Sep‐12 Jan‐13 May‐13 Sep‐13 Jan‐14 May‐14 Sep‐14 Jan‐15 May‐15 Sep‐15 Jan‐16 May‐16 Sep‐16
Jan‐10 May‐10 Sep‐10 Jan‐11 May‐11 Sep‐11 Jan‐12 May‐12 Sep‐12 Jan‐13 May‐13 Sep‐13 Jan‐14 May‐14 Sep‐14 Jan‐15 May‐15 Sep‐15 Jan‐16 May‐16 Sep‐16
Figure 4: PER and EV/EBITDA band
PER (x) 12.00
10.00
EV/EBITDA (x)
+1S.D.
8.00 +1S.D. Average
4.00 ‐1S.D.
2.00
‐ ‐
Source: THCOM and KT Zmico Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, PACE, TPOLY, M‐CHAI, TFD, SUTHA.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
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KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
