Advanced Info Service Shares Continue To Struggle On Earnings Outlook

Witawat (Ed) Wijaranakula, Ph.D.
Thu Mar 2, 2017

Advanced Info Service (AIS) PCL (SET:ADVANC) (OTCMKTS:AVIFY), 40.45% stake owned by Intouch Holdings PCL (SET:INTUCH) and 23.32% stake owned by Singtel Strategic Investments Pte Ltd., as of February 20, 2017, is the leading GSM mobile operator in Thailand with a total of 41.03 million subscribers and over 50% market share by revenue, as reported at the end of fourth quarter 2016. The company operates in three segments: mobile phone and call center services, mobile phone sales, and datanet and broadband services. Advanced Wireless Network (AWN) Co., Ltd., formerly known as AIS Wireless Communication Network Co., Ltd., operates as an AIS subsidiary.

Advanced Info Service said on February 3 that its fourth quarter 2016 revenues were 41.32 billion baht, up 3.9% year-over-year. The company posted fourth quarter 2016 EBITDA of 15.06 billion baht, down 12% year-over-year. For the full year 2016, the revenues declined 2% to 152.15 billion baht, compared to 155.21 billion baht in 2015, while the EBITDA plunged 14% to 60.74 billion baht. Despite the decline in both full year 2016 revenues and EBITDA, the results still beat the consensus estimate of 26 analysts polled by Thomson Reuters.

The company blamed lower profits due to the payments to a Thai state-owned telecommunications company, TOT PCL, for the use of spectrum, towers, and equipment and higher marketing expenses for handset subsidies. The next earnings announcement is expected on April 27, 2017. Analysts are expecting the first quarter 2017 earnings to plunge as much as 50% on a year-over-year basis.

AIS reported a dividend of 10.08 baht a share in 2016, which represents a 22.4% decrease from 2015. The company said it has revised its dividend policy to a minimum 70% payout of net profits from 2017 onward. According to Thomson Reuters, the 26 analysts covering the company expect dividends of 7.6 baht a share for the upcoming fiscal year, representing a decrease of 24.59%. 

The company said AWN, an Advance Info Service subsidiary, participated in the auction of the 900MHz spectrum on May 27, 2016 and won a license at the bid price of 75.65 billion baht. After AWN made the first payment of 8.04 billion baht, the license was granted by the National Broadcasting and Telecommunications Commission (NBTC) of Thailand and was effective from July 1, 2016 for 15 years.

From our technical viewpoint, ADVANC shares have been rejected twice at the 186 baht resistance level due to overhead supply, as investors are motivated to sell their shares when the price returns to the level at which they bought it so they can get out at a break-even point. The stock is now bumping into the trendline resistance as it tries to re-establish the ascending channel. The trading range between 141 and 186 baht has also emerged, meaning the stock could be stuck in this range until the fundamentals improve.

As of February 25, 2017, the consensus forecast amongst 26 investment analysts polled by Thomson Reuters advises investors that the company will Outperform the market, with the median 12-month price target of 180 baht per share.

Disclosure: No position and no recommendation for any companies mentioned.


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