CMNT> SAMART: Maybank Kim Eng recommends Buy,target price is Bt36.00/share Samart Corporation (SAMART) Buy (unchanged) Share price: THB25.50 Target price: THB36.00 (from 26.00) Smart solution, smart life by SAMART We have revised up 2015 earnings forecast following a 12% and 17% upward earnings revision of SIM and SAMTEL respectively as well as increased forecasts of non-listed businesses. The positive prospect of set-top-box business and substation urged us to lift our 2015 earnings projection by 11%, with a revised target price at Bt36.00, BUY. 2015 forecasts raised by 11%: Our revision followed the 12% and 17% upward earnings revision of SIM and SAMTEL as well as higher projections for non-listed businesses. 1) We have lifted Samart Engineerings (SE) 2015 revenue forecast by 123% after revising up set-top-box sales assumption to 4.4 million from 2 million following the lifting of household assumption to 22.9 million from 22 million and market share assumption to 30% from 20%. We believe the company is well-prepared and has many distribution centers. The delay lead many coupon should be distributed in 2015. Moreover, we have also included revenues from antenna sales into our model. 2) We have raised Tedas sales forecast by 92% as we included revenues from construction works of power substation for the Metropolitan Electricity Authority, announced on July 4, and revenues from substation construction and power transmission system improvement for the South and Southwest worth a combine of Bt123.2 bn over the 7 years, assuming Tedas 10% share, or Bt1,760mn/year. Therefore, we raise our revenues projection by 21% and earnings forecast by 115 to Bt2,256mn (+24% YoY). Yet, we remain cautious over gross margin and SG&A. Potential listing of 1-2 units in 2015: SAMART has a number of units with growth potential and decent profitability such as units that it owns directly such as Samart U-Trans, operating domestic aeronautical radio business, and Teda, which the company aims to invest in mega utilities projects both locally and abroad (providing big upside to our forecast). Companies owned by its affiliates such as BUG, a unit of SIM, or other units of BUG could also be listed as they involve with media, printing, and content businesses, which would benefit from growth of internet and smartphone penetration. Current implied only Bt5.60 of non-listed, but earnings not a mere: due to 70%, 70% and 68% stake in SIM, SAMTEL and OTO respectively, their market price implied Bt19.90 of SAMART. So, the Bt25.50 market price of SAMART implied value of non-listed only of Bt5.60, but outlook has very big upside on utilities mega projects. Our upward 2015 earnings revision pushed EPS to Bt2.25 (38% from SIM, 36% from SAMTEL, and 27% from non-listed units). With PER at 16x, close to Bloomberg consensus at 16.3x, we come up with 2015 target price at Bt36.00, offering upside of 41% and dividend yields of 4.1% and 5.1% in 20014-2015 respectively. We maintain our BUY rating as stock price implies just 11.3x 2015 PER while peak PER was at 20x. Upside from our forecast 1. Investment in utilities projects both locally and abroad. Value added from such investment depends largely on the investment size. According to the companys policy, it usually invests in secured projects with high profitability and stable earnings in the long run. Should this type of investment materialize, they could generate substantial upside to the stock price. 2. Our set-top-box sales projection based solely on assumption of sales under the coupon distributed to household units, excluding sales from its own marketing initiatives which could result in higher price and profitability. 3. Listing units on the bourse could unlock value of assets in affiliate companies. 4. We estimate Tedas market share in power substation works at merely 10% of overall investment value approved by the NCPO. 5. The expansion of DTV network will benefit SIMs DTV Smartphone sales, which could beat our expectations of 5 million units for 2015 from 3.4 million the former projection. The company expects to sell more than 4 million units in 2014. 6. The potential signing of new MVNO contract with TOT could drive SIMs MVNO revenues and make them substantiate portion for SIM. 7. TOTs investment in the second phase of 3G base stations positive to SAMTEL backlog. Chatchai Jindarat maybank-ke.co.th (662) 658-6300 By Maybank Kim Eng Securities (Thailand) Company Limited on Aug 25, 2014 Disclaimer : Due to different characteristics, objectives and strategies of institutional and retail investors, the research reports of Maybank Kim Eng Research and KELIVE Research may differ in either recommendation or target price, or both. KELIVE Research is intended for retail investors (maybank-ke.co.th) while Maybank Kim Eng Research is intended only for institutional investors based outside Thailand (kimengresearch.sg). It is therefore important for each investor to read and understand the assumptions and basis of recommendation of each report This research report is prepared for general circulation. It does not have regard to the specific investment objectives, financial situation, or particular needs of any specific person who may receive this report. The information contained herein is provided on the basis of information received or provided to us, but its completeness and accuracy are not guaranteed. Opinions expressed in this report are subject to change without notice, and no part of this publication is to be construed as an offer, or solicitation of an offer, to buy or sell any securities or financial instruments whether referred to therein or otherwise. We do not accept any liability whatsoever whether direct or indirect that may arise from the use of information contained in this report, or a reliance on our opinion expressed in this report. Maybank Kim Eng Securities (Thailand) Public Company Limited, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.
Posted on: Mon, 25 Aug 2014 04:46:45 +0000
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