20161013-辉立证券-Intouch_Holdings_12页_940kb

Intouch Holdings Summary

Core Content

Intouch Holdings is a holding company primarily engaged in telecommunications and digital content. The company holds significant stakes in two key subsidiaries: ADVANC (40.45%) and THCOM (41.14%), which are central to its operations. The report outlines the financial performance and outlook for Intouch Holdings for the fiscal years 2016 and 2017, highlighting the challenges and opportunities in its core businesses.

Main Points

• 3QFY16 Performance: Intouch Holdings is expected to report a 12% year-over-year (y-y) decline in net profit and a 60% quarter-over-quarter (q-q) decline, primarily due to underperformance in ADVANC's wireless telecommunications and THCOM's satellite and overseas businesses.
• Cost Pressures: The decline in profit is attributed to rising operating costs in ADVANC, especially from network expansion and marketing expenses, and declining revenues from THCOM's satellite business due to reduced transponder utilization and increased revenue sharing costs.
• Fiscal Year 2016 Outlook: Despite the challenges, the report raises the FY16 net profit outlook by 33% due to the reversal of a provision from an arbitration ruling in 2QFY16. However, the net profit for FY17 is expected to drop by 18% y-y, as the provision reversal is unlikely to recur.
• Dividend Policy Change: Intouch changed its dividend policy to a pass-through model, which may benefit shareholders by aligning dividends with the performance of its associates and subsidiaries.
• Dividend Yield: The dividend yield for FY17 is projected to be 6.0%, which is lower than the previous years but still significant.
• Rating Upgrade: The rating on Intouch shares has been upgraded to 'BUY' from 'ACCUMULATE', reflecting the company's high dividend yield and potential for growth in the domestic wireless telecommunications sector.

Key Financial Information

Key Financial Highlights

• Net Profit: Expected to rise to Bt17,364mn for FY16, but drop to Bt14,196mn for FY17.
• EPS: Projected to be Bt5.42 for FY16 and Bt4.43 for FY17.
• BVPS: Expected to increase to Bt10.86 for FY17.
• P/B: Likely to decrease to 4.7 for FY17.
• Dividend Yield: Projected to be 6.0% for FY17.
• ROE: Expected to decline to 44.27% for FY17.
• Debt/Equity: Likely to drop to 0.83 for FY17.

Valuation and Performance

• Target Price: Raised to Bt64/share for FY17, representing a 32.1% increase.
• Price Performance: The stock has underperformed in the past year, with a 28% decline relative to the SET index.
• Market Cap: As of 13 October 2016, the market cap is Bt162,726mn or USD4,557mn.
• Share Price: The closing price is Bt50.75.
• Outstanding Shares: 3,206 million shares.
• 52-Week Range: Bt44.5 to Bt76.75.

Key Developments

• In 2015, Intouch invested in four 'InVent' venture capital projects and formed a joint venture with Hyundai for home shopping in Thailand.
• In 2014, the company changed its dividend policy and saw a dilution in its stake in Ookbee due to a capital raise.
• In 2013, Intouch made new investments in two 'InVent' projects.

Risk Factors

• Uncertainty regarding the timing and success of investments.
• Technological changes in the wireless telecommunications sector.
• Uncertainty about the future growth prospects of the satellite business.

Corporate Governance and Peer Comparison

• The report includes a corporate governance survey by the Thai Institute of Directors Association (IOD), indicating that Intouch Holdings is rated at Level 5 (Extended) for anti-corruption indicators.
• Peer comparison data is provided, showing that Intouch's P/E and P/B ratios are lower than those of some other companies, while its dividend yield is higher.

Conclusion

Intouch Holdings faces challenges in its core businesses, particularly in wireless telecommunications and satellite operations, but the company's strategic investments and dividend policy changes may provide a pathway to long-term growth. The rating upgrade to 'BUY' reflects the potential for strong dividend yields and the expected recovery in the domestic wireless telecommunications sector.