DTAC - Hit the bottom; recovery on the way (TP Bt52.0, OUTPERFORM)
(17/10/2018 - 08:30)
กลุ่มอุตสาหกรรม เทคโนโลยีสารสนเทศและการสื่อสาร
หุ้น DTAC
มูลค่าพื้นฐาน 52.00
คำแนะนำ BUY
  • DTAC reported Bt921m net loss for 3Q18 due to a one-off expense; better than our estimate of Bt1.1bn loss
  • Earnings have bottomed out; expect strong recovery from 4Q18 onwards
  • OUTPERFORM, TP Bt52; deserves to be re-rated as market should no longer be concerned over its spectrum holding

 

3Q18 results were better-than-expected

DTAC reported Bt921m net loss for 3Q18 vs Bt179m profit in 2Q18 and Bt601m profit in 3Q17. This was better than we expected due to lower-than-expected cost of services and depreciation charge. DTAC booked one-time Bt1.12bn (net tax) expense related to a dispute with CAT over telecom assets. Stripping that out, DTAC booked Bt224m core profit, up 80% qoq but down 63% yoy. Service revenue ex. IC continued to drop, by 2% yoy to Bt15.7bn due to uncertainty after its concession expires. Net adds remained negative at 313k (-404k for prepaid and +92k for postpaid). Overall, 9M18 profit accounts for 51% of our full-year forecast.     

 

Positive tone from conference call; expect earnings to recover strongly from 4Q18

We believe DTAC is trying to regain customer confidence in its network quality. DTAC is more aggressive in rolling out its network in 3Q18, spending Bt6.1bn in CAPEX. This is the highest in the past 10 quarters. The number of base stations for 2300MHz has reached 6k (from 500 in June), so DTAC raised year-end target to 10k from 7k previously. The decision to bid 900MHz spectrum is another positive factor as it removes concerns over network coverage and long-term competitiveness. This should signal Telenor Group is committed to the Thai market. We also expect 4Q18F earnings to recover strongly both qoq and yoy, supported by the absence of Bt4.0bn/quarter amortization charge for its concession network.

 

OUTPERFORM, DCF-based TP of Bt52 (8.1% WACC, 2% LTG), implies 7.5x FY19F EV/EBITDA

We revised down FY18F earnings after including extra items in 3Q18. Our earnings and TP are intact as we had assumed DTAC would secure 900MHz spectrum. DTAC deserves to be re-rated back to its historical average at 7.5x EV/EBITDA from 6.5x currently, as market should no longer be concerned over long-term spectrum access.