ict - mobile
TRANSCRIPT
Connecting Markets East & West
© Nomura
Seeing a clear path
September 2021
ICT - Mobile
Capital Nomura Securities Public Company Limited
Investment Research and Investor Services
Nuttapon Kumnounphon (+66 2638 5777)
ICT - Mobile - 1Capital Nomura Securities Public Company Limited
◼ Sector summary: “Bullish” on ICT-mobile business.
There are several negative factors that pressure on industry earnings over the past years
such as COVID-19, 5G investment and license amortization
5G will be the new s-curve for the mobile service business
COVID-19 situation improving, we expect mobile service revenues in 4Q21F increase y-y
Broadband and enterprise customers have potential for high-growth market over the next
three years
A decline in operating cost is the main key to drive earnings in 2H21F
Harvest season begins, we expect earnings in 2022F to increase +10% y-y compared to
2021F flat y-y
Upside risks : Asset monetization such as Tower co. and Infra. Fund
◼ Our top picks for 4Q21F and FY2022F :
ADVANC (TP22F 220) : Leader position and dividend yield uplift .
Executive summary
ICT - Mobile - 2Capital Nomura Securities Public Company Limited
SET index vs ICT index
ICT - Mobile - 3Capital Nomura Securities Public Company Limited
Performance over the past two years
Source : company data
Fig 1. Norm profit’s mobile operators
Fig 3. Blended ARPU (THB/sub/month)
Fig 2. Mobile service revenues (ex. IC)
Fig 4 . %D&A trend
ICT - Mobile - 4Capital Nomura Securities Public Company Limited
Performance over the past two years
Source : company data
Fig 5. %Network OPEX to total revenues
Fig 7. %Market cost to total revenues
Fig 6. Handset subsidy expense (THBmn)
Fig 8 . %Admin cost to total revenues
ICT - Mobile - 5Capital Nomura Securities Public Company Limited
2H21F Outlook : Price competition stay high
Source : company data, NBTC, Cns estimates
Fig 9. service imbalance
Fig 11. RPM for voice and mobile data is very low.
Fig 10. Unlimited package in prepaid
Fig 12. Pre to post strategy
ICT - Mobile - 6Capital Nomura Securities Public Company Limited
Key drivers for 2H21F-23F : 5G Adoption
Source : company data
Fig 13. More demand for data usage
Fig 15. 5G handset and coverage
Fig 14. %5G adoption in global market
Fig 16. 5G customers in Thailand (Subsmn)
ICT - Mobile - 7Capital Nomura Securities Public Company Limited
Key drivers for 2H21F-23F:Economy and tourism
Source : NBTC, mhesi.go.th, ourworlddata.org
Fig 17. MOU (min/sub) and Blended ARPU (THB/sub)
Fig 19. Covid-19 daily case and %vaccinated at least 1 dose
Fig 18. IR and IDD revenues trend
Fig 20. Timeline reopening
ICT - Mobile - 8Capital Nomura Securities Public Company Limited
Key drivers for 2H21-23F : Broadband business
Source : company data
Fig 21. Internet broadband penetration of Thailand (%)
Fig 23. Broadband ARPU (THB/sub/month)
Fig 22. New technology and new content platform
Fig 24. Fixed BB revenues trend and growth (%)
ICT - Mobile - 9Capital Nomura Securities Public Company Limited
Key drivers for 2H21-23F : B2B service
Source : IDC, Frost& Sullivan
Fig 25.Worldwide ICT spending 2018-2023F (USDmn)
ICT - Mobile - 10Capital Nomura Securities Public Company Limited
Key drivers for 2H21-23F : B2B service
Source : IDC, Frost& Sullivan
Fig 26.Thailand cloud and DC market
Fig 28. IoT/M2M market
Fig 27. Cybersecurity market
Fig 29. ICT solution market
ICT - Mobile - 11Capital Nomura Securities Public Company Limited
Other business : Digital service provider
Digital lending business
11
ADVANC DTAC TRUE
ICT - Mobile - 12Capital Nomura Securities Public Company Limited
Expected service revenue growth in 2022-24F
Source : IDC, Frost& Sullivan
Fig 30.Service revenue (ex. IC) in 2019-24F
ICT - Mobile - 13Capital Nomura Securities Public Company Limited
Key drivers 2H21F-23F: Room for cost reduction
Source : company data
Fig 31. CAPEX to sales (%)
Fig 33. SG&A/sales trend
Fig 32. Network OPEX trend
Fig 34. Net profit and growth (%)
ICT - Mobile - 14Capital Nomura Securities Public Company Limited
Upside risks : Towerco concept
Source : company data
Fig 35. Valuation upside for Towerco concept
ICT - Mobile - 15Capital Nomura Securities Public Company Limited 15
• ฐานะการเงินของกลุม่ Telenor ยงัแข็งแกรง่ Net debt/EBITDA 2 เท่า เทียบกบั DTAC ท่ี 2.4 เท่า
• ฐานรายไดแ้ละ EBITDA จากไทยยงัแข็งแกรง่ คิดเป็นสดัสว่นอนัดบั Top 3 ของเครอืราว 17-18%ของ EBITDA เครอื
• เราจงึคาดโอกาสเกิดดีลขายกิจการในไทยของกลุม่เทเลนอรช์่วง 1-2 ปีขา้งหนา้ยงัมีนอ้ยกว่า 33% แต่หากเกิดขึน้จรงิ เราประเมนิเป็น 2
กรณีหลกั คือ
• กรณีท่ี 1 หากเป็นผูป้ระกอบการรายเดิมในตลาด (โอกาสมากกว่า 50%) คาดจะสง่ผลบวกต่อภาพรวมอตุสาหกรรม การแข่งขนัลดลง
• กรณีท่ี 2 หากเป็นผูเ้ลน่รายใหม ่(โอกาสเกิดนอ้ย) คาดอาจมีผลใหเ้กิดการแขง่ขนัดา้นราคาท่ีรุนแรงขึน้ เป็นลบทัง้ ADVANC และ
TRUE
เราใหโ้อกาสนอ้ยทีก่ลุม่เทเลนอรจ์ะขาย DTAC ในชว่ง 1-2 ปีขา้งหน้า
Upside risks : M&A deal
ICT - Mobile - 16Capital Nomura Securities Public Company Limited
Fig 37. Growth outlook and peer comparison
Top pick : ADVANC (TP220)
Fig 36. Valuation and ROE (%)
Source: Company data and CNS estimate
EV/EBITDA and ROE(%) PER and ROE (%)
TP22F Rating
FY20 FY21F FY22F FY20 FY21F FY22F FY20 FY21F FY22F FY21F (THB)
Mobile 40,236 40,731 44,621 -26% 1% 10% 7.5 7.3 6.9 2.8%
ADVANC 27,433 26,213 27,870 -12% -4% 6% 8.1 7.8 7.4 3% 220 BUY
DTAC 5,327 4,836 5,359 -11% -9% 11% 5.6 5.2 5.0 5% 40 TRADING BUY
INTUCH 10,486 10,149 11,087 -19% -3% 9% 242.5 310.9 509.5 3% 70 NEUTRAL
TRUE (3,009) (467) 304 -176% up up 8.8 9.0 8.4 0% 3.9 TRADING BUY
EV/EBITDA (x)Norm. Profit (THB mn) DiY (%)Growth (%)
ICT - Mobile - 17Capital Nomura Securities Public Company Limited Source: EGAT, Company data and CNS estimate
Checklist for investment in mobile operators
Criteria ADVANC DTAC TRUE INTUCH
Price competition
5G customer growth
Economic and tourism recovery
The supplement business
growth such as BB and
corporate customer
Cost reduction such as asset
monetization
Dividend and valuation
ICT - Mobile - 18Capital Nomura Securities Public Company Limited
▪ Solid position in mobile business
▪ Operating cost control drives EBITDA in
2021F which is higher than revenue
▪ Potential growth in 3 main factors
▪ The number of 5G subscribers hits 1
million in 1H21 and is projected to reach 2
million by end of this year
▪ Internet business continues to gain market
share to 12% and is expected to become
the 3rd leader by the end of 2022F
▪ Revenue from corporate customer is
estimated to increase at least 10%
annually for the next three years
▪ Returning to growth stage, we expect norm
profit in 2022F-23F increase +5% per annum
compared to 2020-21F decrease -8% per
annum
▪ Strong dividend yield at least 3-4% and high
chance to get higher dividend payout ratio at
75%
Source: CNS, Bloomberg
Target Price 22F : THB 220.0 (DCF wacc 8%, g~2.5%)
Advanced Info Service (ADVANC)
Fig 38. Financial Highlights
Fig 39. EV/EBITDA
Key financials & valuations
31 Dec (THBmn) 2019A 2020 2021F 2022F 2023F
Revenue 180,294 172,890 176,138 182,385 187,948
EBITDA 76,512 88,402 92,556 95,588 97,548
Normalised profit 31,272 27,433 26,213 27,870 28,954
Net profit 31,190 27,434 26,213 27,870 28,954
EPS (THB) 10.49 9.2 8.8 9.4 9.7
EPS growth (%) 5.1 (12.05) (4.44) 6.32 3.89
PER (x) 18.1 20.59 21.55 20.27 19.51
BVPS (THB) 23.3 25.41 28.71 31.52 34.44
P/BV (x) 8.2 7.48 6.62 6.03 5.52
EV/EBITDA (x) 8.4 7.95 7.71 7.27 6.90
DPS (THB) 7.34 6.92 6.17 6.56 6.82
Dividend yield (%) 3.9 3.64 3.25 3.45 3.59
ROE (%) 49.2 37.88 32.58 31.13 29.53
Interest Bearing Debt /Equity (x) 1.4 2.07 2.01 1.63 1.30
ICT - Mobile - 19Capital Nomura Securities Public Company Limited
ANALYST CERTIFICATION FOR REGULATION
I, Nuttapon Kumnounphon, a research analyst employed by Capital Nomura Securities, hereby certify that all of the views expressed in this research report accurately reflect my personal views about
any and all of the subject securities or issuers discussed herein.
In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views that I have expressed in this research report, nor is
it tied to any specific investment banking transactions performed by Nomura Securities International, Inc., Nomura International plc or by any other Nomura Group company or affiliate thereof.
Explanation of CNS rating system for Thailand companies under coverage published from 2 March 2009:
Stocks:
Stock recommendations are based on absolute valuation upside (downside), which is defined as (Fair Value - Current Price) / Current Price, subject to limited management discretion. In most cases,
the Fair Value will equal the analyst’s assessment of the current intrinsic fair value of the stock using an appropriate valuation methodology such as Discounted Cash Flow or Multiple analysis etc.
However, if the analyst doesn’t think the market will revalue the stock over the specified time horizon due to a lack of events or catalysts, then the fair value may differ from the intrinsic fair value. In
most cases, therefore, our recommendation is an assessment of the difference between current market price and our estimate of current intrinsic fair value. Recommendations are set with a 6-12
month horizon unless specified otherwise. Accordingly, within this horizon, price volatility may cause the actual upside or downside based on the prevailing market price to differ from the upside or
downside implied by the recommendation.
• A "Buy” recommendation indicates that potential upside is 15% or more.
• A “Trading Buy” recommendation indicates that potential upside is between 5% - 15%.
• A "Neutral" recommendation indicates that potential upside is less than 5% or downside is less than 5%.
• A "Reduce" recommendation indicates that potential downside is 5% or more.
Sectors:
A "Bullish" rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation.
A "Neutral" rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation.
A "Bearish" rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation.
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