Price (Bt) 1.60
Target (Bt) 1.66
Set Index 533.92
1Q09 norm. profit hits Bt248mn
Falling depreciation and SG&A provide big boost
TRUE posted a 1Q09 net loss of Bt131mn, but results were better than
expected. Excluding a Bt378mn forex loss from a foreign-currency loan, TRUE had a Bt248mn normalised profit. If we exclude fluctuating tax items, its result before taxes turned from a Bt281mn loss from the previous quarter to a Bt612mn profit. Improvement factors included: 1) a significant drop in depreciation expenses after True Move signed a memorandum of agreement to use transferred assets after the end of its concession in 2018, 2) True Move’s success in reducing net interconnection expenses to Bt28mn and 3) a decline in expenses.
Upgrading 2009 forecast to Bt522mn normalised profit
We are upgrading our 2009 normalised results forecast from a Bt752mn loss to a Bt522mn profit on:
1) cutting the depreciation assumption by 10% to reflect its depreciation extension period (no impact on
cash flow) and 2) revising down operating expenses to reflect a successful cost control trend.
Maintain FULLY VALUED rating
Our DCF-derived fair value is also raised from Bt1.5/share to 1.66/share, but we are still
reiterating our FULLY VALUED rating. The share’s weak financial status remains an obstacle to expand some
services to competitive levels. If TRUE gains a new 3G license in late-2009 at the very earliest, which is
highly optimistic, True Move will benefit in terms of long-term cost savings but it will definitely need a
financial partner. If there are further 3G license delays, True Move will invest in the HSPA (3G) service
on the 800MHz spectrum, which is unlikely to compensate for the 5% rise in revenue sharing in Sep 2011.
2006 2007 2008 2009F 2010F
Sales 51,955 61,641 61,265 60,879 63,820
EBITDA (Btmn) 17,899 19,122 18,105 18,761 19,631
Normalised Profit -5,513 -1,179 62 522 946
Net Profit -4,028 1,158 -2,355 143 946
Norm EPS (Bt) -1.45 -0.31 0.02 0.07 0.13
EPS (Bt) -1.06 0.3 -0.62 0.02 0.13
PER (x) N.A. 5.3 N.A. 79.8 12
EV/EBITDA (x) 5.1 4.4 4.6 4 3.5
CF/share (Bt) 6.3 1.8 3 1.2 1.8
BV per shr (Bt) 1.8 2.1 1.4 1.7 1.8
Price/BV (x) 0.9 0.8 1.1 1 0.9
DPS (Bt) - - - - -
Dividend yield (%) 0.00% 0.00% 0.00% 0.00% 0.00%
Gearing 12.5 9.7 14.2 5.3 4.5
ROA (%) -3.40% 0.90% -1.90% 0.10% 0.80%
ROE (%) -55.50% 15.60% -34.90% 1.60% 7.70%
Source : Company reports and KELIVE Research estimates.
1Q09 EBITDA recovers to Bt5.1bn
After a very poor performance in 2Q-3Q08, EBITDA recovered to Bt5.1bn in 1Q09, close to the 1Q08
level. The key recovery factor was due to True Move, while the performances from True Visions and True
Online were quite soft.
True Move’s EBITDA grew 38% qoq and 6% yoy to Bt1,868mn in 1Q09
EBITDA was boosted by expense savings
True Move showed a significant improvement in EBITDA, which grew 38% qoq and 6% yoy to Bt1,868mn
in 1Q09. Key drivers were:
1) Operating expenses falling 3% qoq and 6% yoy; and
2) Declining net interconnection (IC) expenses from Bt213mn in 1Q08 and Bt128mn in 4Q08 to Bt23mn
due to successful on-net promotions.
In addition, although net subscriber additions fell to only 247K, this was equal to 32% of market
+net additions. The industry grew at a slower rate during a severe economic downtrend.
Depreciation savings after MOA with CAT
The bottom-line was helped by Bt204mn in savings from depreciation expenses after the
depreciation period for network equipment transferred to CAT was extended following the signing of a
memorandum of agreement, allowing for the network to continue to be leased after the end of the concession.
In addition, True Move’s depreciation expenses declined 24% qoq to Bt974mn.
True Online: broadband growing, fixed-line weakening
Broadband grew continually
Revenue from internet broadband services grew 12% yoy and 4% qoq to Bt1.3bn, but at a slower rate
due to the soft economy. Furthermore, competition in Bangkok was more intense. Net subscriber additions
were 8,411 in 1Q09 compared to the average of 21K per quarter last year. Average revenue per user (ARPU)
rose 1.5% qoq to Bt723/month. In addition, TRUE plans to expand services into high-demand provincial areas.
True Online possesses a strong brand and favourable content but its weak financials appear to be an
obstacle to expand service.
Traditional media growth slows
Traditional voice revenue from the fixed-line business, public phones and PCT declined 6% qoq and
18% yoy to Bt2.3bn. With slower growth of the broadband business, and deteriorating voice revenue, total
revenue of the True Online group fell 3% qoq to Bt6.5bn.
EBITDA fell 5% yoy to Bt2,670mn
Although total revenue increased 2% yoy, EBITDA fell 5% yoy to Bt2.7bn due to higher operating
expenses. We believe that the company needs to spend more on marketing and in the broadband business during
the present highly competitive climate. EBITDA . however, is 9% more than the previous quarter as expenses
normally peak in the fourth quarter.
True Visions: premium service slowing
Expanding via “mass market”
The total subscriber base rose by 110,595 in 1Q09 to 1.58mn mainly via the “mass market”
(customers with no monthly fee and limited channels). On the other hand, the number of premium subscribers
fell by 9K due to the soft economy and seasonal factor.
EBITDA fell 5% yoy to Bt676mn
Although sales rose 5% yoy to Bt2,255mn, EBTIDA fell 5% yoy to Bt676mn due to the rising cost of
producing its own channels. True Visions contributed around 13% of TRUE’s EBITDA in 1Q09.
Expect advertising in 3Q09
MCOT’s board approved True Visions to earn revenue via advertising. Contract amendments are under
negotiation now. The company expected this to start in 3Q09. We expect a 10-15% addition in revenues from
advertising. Moreover expansion can be accelerated by the offering of free services from advertising
revenues.
By Kim Eng Securities (Thailand) Company Limited on May 18, 2009
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