Price (Bt) 78.50
Target (Bt) 91.00
Set Index 542.69
The strongest and the best position
Reiterate LONG-TERM BUY rating
We are reiterating our LONG-TERM BUY rating on ADVANC based on the
strong position in the Thai telecom industry and the ability to handle the soft economy and the advantage of a very strong financial status in terms of a strengthening brand and investments in both network quality, area expansion and new technology. Furthermore, management is committed to a minimum dividend payment of Bt6.30/share or a generous 8% yield at the current share price. In addition, we value ADVANC at Bt91/share by our DCF method (excluding new 3G license).
Better position in 2Q09
Although we expect mobile usage to seasonally drop in 2Q09 from the previous quarter, ADVANC is
likely to be in a relatively better position than peers from controlled marketing expenses, the ability to
maintain the net interconnection (IC) revenue and a reduction of monthly fees. Furthermore, DTAC will have
around a Bt90m/quarter net rise in rental expenses after moving to a new head office in April.
Cash is king
The strong financial status (with 0.12x gearing as of 1Q09) and the highest cash flow give ADVANC
advantages over competitors in terms of a higher marketing budget with a stronger brand, flexibility in
investments in service upgrades and expansion including an auction for the new 3G licenses. Furthermore,
the company can maintain a generous dividend payment.
Position even better, if new 3G licenses are delayed
If the 3G license auction is delayed, telecoms will be negatively impacted by sentiment, as any
cost savings will also be delayed. However, the negative impact on DTAC and True Move is likely to be more
than that on ADVANC as revenue sharing with DTAC and True Move will rise by 5% in September 2011 (ADVANC is
already at the peak level) and getting the new license and migrating customers would be ideal for them.
Furthermore, 3G regulation finalisation is necessary before True Move’s new partner makes an investment
decision. In addition, as ADVANC is TOT’s only mobile concessionaire, it is the first option for Thai
Mobile in selecting a partner/cooperator.
By Kim Eng Securities (Thailand) Company Limited on May 27, 2009
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