20150715-Maybank_KERPL-The_digital_leader__Upgrade_to_BUY_12页_194kb

Globe Telecom (GLO PM) Summary

Core Content

Globe Telecom (GLO PM) is a leading telecommunications company in the Philippines. The document outlines the company's financial performance, growth potential, and strategic initiatives, including the acquisition of Bayantel.

Key Financial Metrics

• Share Price: PHP2,456.00
• Target Price: PHP2,780.00 (+13%)
• Market Cap (USD): 7.2B
• Average Daily Trade Value (USD): 5M
• 52-week high/low (PHP): 2,702.00 / 1,602.00
• 3-month average turnover (USDm): 5.3
• Free float (%): 22.4
• Issued shares (m): 133
• Market capitalization: PHP326.0B

Major Shareholders

• Singapore Telecommunications Ltd.: 47.2%
• Ayala Corp.: 30.4%
• Matthews International Capital Management: 3.3%

Financial Forecasts

• Revenue (PHPm):
  • 2015E: 112,981.9
  • 2016E: 121,353.9
  • 2017E: 128,156.6
• EBITDA (PHPm):
  • 2015E: 45,820.9
  • 2016E: 48,851.0
  • 2017E: 51,189.7
• Core Net Profit (PHPm):
  • 2015E: 17,436.4
  • 2016E: 19,070.8
  • 2017E: 20,032.9
• Core EPS (PHP):
  • 2015E: 130.82
  • 2016E: 143.08
  • 2017E: 150.30
• Core P/E (x):
  • 2015E: 18.8
  • 2016E: 17.2
  • 2017E: 16.3
• P/BV (x):
  • 2015E: 5.4
  • 2016E: 4.8
  • 2017E: 4.3
• Net Dividend Yield (%):
  • 2015E: 3.4
  • 2016E: 3.4
  • 2017E: 3.4
• ROAE (%):
  • 2015E: 30.4
  • 2016E: 29.9
  • 2017E: 28.0
• ROAA (%):
  • 2015E: 9.6
  • 2016E: 10.1
  • 2017E: 10.0
• EV/EBITDA (x):
  • 2015E: 8.5
  • 2016E: 7.9
  • 2017E: 7.4
• Net Debt/Equity (%):
  • 2015E: 96.1
  • 2016E: 82.1
  • 2017E: 66.3

Forecast Adjustments

• Net Income Forecast: Raised by 4% for 2015 and 10% for 2016-2017.
• Mobile Prepaid Subscribers: Increased by 3% for 2015-2017.
• Mobile Blended ARPU: Increased by 1% for 2016-2017.
• Broadband Subscribers: Increased by 4% for 2015-2017.
• Fixed Line Revenue: Increased by 2-4% for 2015-2017.
• Target Price (PHP): Raised by 18% to PHP2,780.00.

Growth Potential

• Data Revenue: Significant growth potential due to low smartphone penetration (~35%) and rising social media usage.
• "Free Facebook" Promotion: Successfully increased subscriber base and data revenue, highlighting the role of social media in the Philippines.
• Smartphone Penetration: Expected to increase to 50% in the next 24 months.
• Mobile Data Revenue (1Q15): Grew by 58% YoY to PHP4.4b, representing 17% of total service revenue.
• Total Data-Related Revenue (1Q15): PHP9.6b, equivalent to 37% of total service revenue.

Bayantel Acquisition

• Debt-to-Equity Conversion: GLO will convert its debt holdings into equity, acquiring at least 54% of Bayantel.
• Impact on EBITDA: The acquisition is expected to be marginally EBITDA-accretive.
• Bayantel's Performance (2014):
  • EBITDA: PHP1.7b
  • Operating Income: PHP190m
• Debt Reduction: Bayantel's restructured debt reduced to PHP9.0b (USD200m).
• Fixed-Line & DSL Subscribers: ~184,000 and ~132,000 respectively.
• Capacity Interest: 83% in the National Digital Transmission Network (NDTN).

Key Viewpoints

• Stock Upgrade: The stock was upgraded to BUY from HOLD due to 13% upside potential.
• Digital Leadership: GLO is a digital leader in the Philippines, with a strong focus on data monetization.
• Strategic Partnerships: Collaborations with content providers like Facebook, Viber, Spotify, NBA, and Walt Disney are key to driving data usage.
• Subscriber Growth: Mobile subscribers reached ~46.1m as of end-Mar 2015, with a 13% YoY increase.
• ARPU Trends: Mobile ARPU was PHP151 in 1Q15, with a slight decline expected in 2016 and 2017.

Summary of Financial Highlights

• 1Q15 Performance:
  • Core Earnings: +25% YoY
  • Revenue: +13% YoY
• Data Revenue Growth: Mobile data revenue grew by 58% YoY, and total data-related revenue grew by 39% YoY.
• Fixed Line & Broadband Growth: Revenue grew by 25% YoY in 1Q15.
• Smartphone Penetration: Expected to increase to 50% in the next two years, enhancing data usage potential.

Strategic Implications

• Enhanced Data Monetization: The company's strategy of promoting data usage through partnerships and promotions is central to its growth.
• Network Expansion: Acquiring Bayantel will enhance GLO's broadband and fixed-line capabilities.
• Cost Reduction: Debt-to-equity conversion is expected to reduce interest expenses for Bayantel.
• Market Position: GLO is perceived as a lifestyle brand, capitalizing on the growing digital consumer base.

Research Contacts

• Regional Head, Research & Economics: Sadiq CURRIMBOHY (65) 6231 5836 sadiq@maybank-ke.com.sg
• Regional Head of Institutional Research: WONG Chew Hann, CA (603) 2297 8686 wchewh@maybank-ib.com
• Regional Head of Retail Research: ONG Seng Yeow (65) 6432 1453 ongsengyeow@maybank-ke.com.sg
• Chief Economist (Singapore | Malaysia): Suhaimi LIJAS (603) 2297 8682 suhaimi_ilias@maybank-ob.com
• Philippines Research: Luz LORENZO (63) 28498836 luz_lorenzo@maybank-atrke.com
• Thailand Research: Tim LEELAHAPHAN (66) 2658 6300 ext 1420 tim.l@maybank-ke.co.th
• Indonesia Chief Economist: JUNIMAN (62) 21 29228888 ext 29682 Juniman@bankbii.com
• Global Strategist: Sadig CURRIMBOY (65) 6231 5836 sadiq@maybank-ke.com.sg
• Hong Kong / Regional Strategy: Willie CHAN (852) 2268 0631 williechan@kimeng.com.hk

Conclusion

Globe Telecom is positioned for growth through its focus on data monetization, strategic partnerships, and the acquisition of Bayantel. The company's financial performance has shown consistent improvements, and the updated forecasts and target price reflect confidence in its future prospects.