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Advanced Info Service PCL [SET:ADVANC], 23% owned by Singapore Telecommunications Ltd, is the leading mobile operator in Thailand with about 41 million subscribers and 52% of market share by revenue. The company said on August 3, 2015, that its first-half semi-annual 2015 revenues were 78.71 billion baht, missing the 79.65 billion baht consensus estimate of 2 analysts, according to the Financial Times. The company posted first-half 2015 earnings of 0.066 baht per share, missing the 7.24 baht per share consensus estimate of 2 analysts.
ADVANC reported a dividend of 12.00 baht a share in 2014, which represents a 1.23% decrease from 2013. The 25 analysts covering the company expect dividends of 12.92 baht a share for the upcoming fiscal year, representing an increase of 7.66%. The next earnings announcement from ADVANC, for the second-half semi-annual 2015, is expected on February 3. Analysts are expecting earnings of 7.97 baht per share on revenues of 79.76 billion baht.
On November 12, ADVANC and True Corporation [SET:TRUE] won the auction bids held by the National Broadcasting and Telecommunications Commission (NBTC) of Thailand for the two 4G spectrum licenses, of 15 MHz bandwidth each on the 1800 MHz frequency, and agreed to pay 40.99 and 39.79 billion baht, respectively. Both winning bidders are required to offer 4G tariff rates lower than existing 3G service charges, as wireless providers’ 4G networks are cheaper to deliver for cellular carriers than the 3G networks. In addition, they must also roll out their 4G networks to cover half the population within two years after receiving the licenses, increasing to 80% of the population within four years.
On December 15, the NBTC held its auction of the 900 MHz spectrum. TRUE and Jasmine International [SET:JAS] won the bids and will pay a record 76.3 and 75.67 billion baht, respectively, for the two 4G spectrum licenses. One of the reasons that companies were trying to outbid each other is because a mobile company on the 900 MHz band can invest less to set up a smaller number of base stations to achieve the same coverage as those in the 1800 MHz band, since the 900 MHz band has 30-40% better coverage than the 1800 MHz band.
International credit rating agency, Fitch, expects the data tariff in Thailand's mobile market to decline further as incumbent operators, ADVANC, Total Access Communication [SET:DTAC] and TRUE, compete on price with JAS, while their marketing expenses are also likely to rise. Fitch believes that incumbents are also likely to increase investments in 4G capacity ahead of JAS's launch and to support growth in data traffic. As a result, their free cash flows are likely to be negative, and their financial leverages will increase in 2016.
ADVANC has been under selling pressure, after plunging 6.64% to 211 baht per share on November 12, and breaking down the symmetrical triangle chart pattern as investors believe that the company could have overpaid for the licenses. The stock has taken a major 28.84% nosedive since December 15, to close at 153 baht per share on December 30, after the company withdrew from the NBTC auction of the 900 MHz spectrum, citing the price for a license had stretched beyond fair value.
The shares of ADVANC is now trading at a four-year low and could bounce from here, or else it could continue to slide further to test the multi-year trendline support at around the 130 baht per share level. As of January 2, 2016, the consensus forecast amongst 24 investment analysts polled by the Financial Times advises investors that the company will outperform the market, with the median 12-month price target of 215 baht per share.
Disclosure: Long position in ADVANC and no recommendation. |
