Jasmine International

Friday, March 20, 2015
Company Update
Jasmine International
Sell when price rebounds
JAS is giving JAS-W3 Warrants to shareholders at an exercise price that is lower than the market
price in order to seek money for investing in the mobile business, which is already dominated by
big players. Although the shares may be speculated in the short term, fundamentally the warrant
conversion will cause high dilution effect that cannot be compensated promptly by profit from the
new business. SELL is recommended.
JAS
Rec. : SELL
 1 unit of JAS-W3 for 2.04 shares of JAS
The Board of Directors’ Meeting No. 3/2015 of JAS approved the issuance and allocation of
up to 3,497 million units of JAS-W3 Warrants to the existing shareholders in proportion to
their shareholding at a ratio of 2.04 ordinary shares of JAS for one unit of JAS-W3 Warrant.
In this regard, the unit price of JAS-W3 Warrant is B0; the term of the warrants is five
years from the issuance date; the exercise period is the last business day of each quarter
(the first exercise date is the last business day of the first quarter following the issuance
date of JAS-W3 Warrants). The conversion exercise ratio is one unit of JAS-W3 Warrant for
one ordinary share of JAS at an exercise price of B4.30/share. JAS is going XW on June 25,
2015.
 High dilution. New business unlikely to generate profit promptly
It is very likely that shareholders who are given JAS-W3 Warrants will exercise their
conversion rights since the first year (probably 3Q15) because the exercise price is 35%
lower than the market price of JAS. Based on a conservative assumption that JAS-W3
Warrants are entirely converted in the first year, there will be a dilution effect of 33% while
JAS will gain B15bn for investing in a new business, 4G mobile service, which may be a
joint venture with overseas partner (under a negotiation process now), hoping to encourage
JAS home internet and mobile internet use and rival an integrated service of ADVANC and
TRUE. However, we have a negative view on the strategy. Since a mobile business will need
massive investments for nationwide network expansion and license bidding, JAS will have
high fixed expenses in early years of operation. Furthermore, the company will be able to
generate add-on revenue only from its existing customers (while it has to compete with
other mobile operators in the market to seek new subscribers). Accordingly, we believe JAS
would face massive loss at the beginning of the business. We are likely to revise down our
profit forecast when JAS’s business plan is clear. Yet, JAS is ready for the new business in
terms of investments, given its net cash after JASIF establishment and increasing capital
from JAS-W3 Warrants conversion.
Current Price (B): 6.60
Target Price (B): 6.30
Upside : -4.5%
Dividend Yield : 1.8%
Total Return : -2.8%
Market Cap. (Bm) : 51,032
CG Score: NR.
Technical Chart
 Sell when price rebounds
Earnings in the long run can be dampened by the mobile business, which is already
dominated by three major players. In addition, new fair value in case that JAS-W3 Warrants
are entirely converted in 2015 is B6.3. Accordingly, we downgrade our recommendation to
SELL. The fair value has still not included B1.29/share theoretical value of JAS-W3
Warrants; there can be speculation in the short term. The share price may also rebound
after falling sharply yesterday because JAS has explained that it would decrease its paid-up
capital from 142.7 million repurchased shares and would not sell the repurchased shares to
the market as concerned. Nevertheless, due to changes in fundamental factors, we
recommend selling JAS when the price rebounds.
Key Data
FY: Dec 31
Sales & Services (Bm)
Net Profit (Bm)
Norm Profit (Bm)
EPS (B)
PER (x)
DPS (B)
Dividend Yield (%)
BV (B)
EV/EBITDA
FY12A
11,123.0
3,002.9
3,024.7
0.42
15.8
0.25
3.79%
1.72
8.16
FY13A
12,268.5
3,270.8
3,618.3
0.51
13.0
0.15
2.27%
1.81
7.38
FY14F
14,314.6
23,441.3
2,728.3
0.26
25.4
1.62
1.77%
5.52
7.48
FY15F
16,205.3
5,664.1
2,877.1
0.27
24.1
0.12
1.87%
5.67
6.99
Source : ASP Research (FY2015 DPS, excluding B1.5/share extraordinary dividend already paid)
FY16F
17,725.0
5,872.2
3,085.2
0.29
22.4
0.13
2.00%
5.83
10.86
เปรียบเที
บประมาณการของ
ASP
vs ยIAA
Consensus ASP กับ IAA consensus
EPS (B)
EPS
(บาท)
2015F
2558F
2016F
2559F
ASP
3.28
0.79
Cons
1.44
1.17
%d
128
-32
IAA concensus
ASPIAA consensus
ทีSource:
่มา : ประมาณการโดยฝ
ายวิจand
ัย ASP,
Kawee Manitsupawong
License No.: 003974
[email protected]
Suwat Wattanapornprom
License No.: 044015
[email protected]
This report is a rough translation of one of our Thai-language research products. It is produced primarily with time efficiency in mind, so that English-reading clients can see what the main recommendations are from our Thai-language research
team. Given that this is a rough-and-ready translation, Asia Plus Securities pcl cannot be held responsible for translation inaccuracies.) The reports and information contained herein are compiled from public data sources and our analysts'
interviews with executives of listed companies. They are presented for informational purposes only and not to be deemed as solicitations to buy or sell any securities. Best attempts have been made to verify information from these vast sources, but
we cannot guarantee their accuracy, adequacy, completeness and timeliness. The analyses and comments presented herein are opinions of our analysts and do not necessarily reflect the views of Asia Plus Securities.
Operating profit by Quarter
Key data (Bm)
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
Sales & Services Revenue
Cost of Sales & Services
Gross Profit
Selling & Admin. Expenses
Operating Profit
Net Profit
Norm Profit
Norm EPS
Gross Margin (%)
Norm Profit Margin (%)
2,714
(1,070)
1,644
637
968
715
746
0.10
60.6%
27.5%
2,820
(1,153)
1,667
650
981
755
762
0.11
59.1%
27.0%
2,940
(1,216)
1,724
656
976
757
791
0.11
58.6%
26.9%
2,956
(1,160)
1,796
696
1,062
853
853
0.12
60.8%
28.8%
3,026
(1,186)
1,841
669
1,134
885
886
0.12
60.8%
29.3%
3,080
(1,141)
1,938
730
1,161
648
921
0.13
62.9%
29.9%
3,207
(1,226)
1,980
795
1,146
903
958
0.13
61.8%
29.9%
%qoq
4.1%
7.5%
2.1%
8.9%
-1.3%
39.3%
4.0%
4.0%
%YoY
9.1%
0.8%
14.9%
21.2%
17.4%
19.3%
21.1%
21.1%
2014
2013
12,268
(4,713)
7,555
2,889
4,504
3,289
3,618
0.24
61.6%
29.5%
11,123
(4,475)
6,648
2,563
3,878
3,003
3,024
0.21
59.8%
27.2%
%YoY
10.3%
5.3%
13.6%
12.7%
16.1%
9.6%
19.6%
18.2%
Source: Financial Statement / ASP
3Q14 Revenue Structure
Net Profit Margin vs Norm Profit Margin
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
4Q14
3Q14
2Q14
1Q14
4q13
3Q13
2Q13
1Q13
0.0%
Net Prof it Margin
Source :JAS
Source :JAS
ARPU by Quarter
Key Risk
700
1. As a result of fiercer competition, annual growth in
subscriber volume and ARPU may miss forecast.
600
500
400
300
200
ARPU
Source :ASP Research
3Q57
1Q57
3Q56
1Q56
3Q55Re
1Q55 (RE)
3Q54
1Q54
3Q53
1Q53
3Q52
0
1Q52
100
2. There is still risk from legal issues: withdrawal of the
Supreme Court’s order to implement the rehabilitation
plan, thus giving the rights for JAS’s creditors to claim for
debt repayment (the Supreme Court has withdrawn the
order already, so creditor can demand debt payment any
time), or TT&T’s lawsuit against JAS, demanding JAS to
transfer shares in TTTBB back to TT&T (currently under
the court’s deliberation; this takes more than five years
before the conclusion can be made).
3. JAS’s new business (mobile service) may face loss.
Source :ASP Research
2014-2015F Earning Forecast
Statement of Income (million Baht)
End 31 Dec
Statement of Cashflows (million Baht)
2014
2015F
2016F
16,205
2017F
Revenue from operation
12,268
14,315
17,725
Cost of service
(4,713)
(9,200) (11,122) (12,333)
End 31 Dec
2014
23,441
5,664
2,059
2,383
2,717
2,983
(23,136)
(2,826)
(2,847)
5,392
Other revenue
143
276
320
347
Non cash items
Other expense
-
-
-
-
Increase / Decrease from operating activities
0
1,222
1,573
1,784
Net cashflow from operation
4,647
3,234
3,190
3,395
CF from investing
-
-
Interest expense
(297)
(151)
Tax expense
(760)
(335)
Minoritiy
Norm profit
FX gain / loss
Other extraordinary profit
Net profit
EPS
28
3,618
(20)
2,728
(291)
(22)
(290)
(20)
2,877
3,085
74
0
0
(157)
(178)
(2,541)
39,000
(4,000)
(4,000)
(2,761)
20,741
(4,157)
(4,178)
(1,521)
914
Sale (Purchase) of PP&E
Minority Interest
-
-
Net cash used in investing activies
-
Cash flows from financing activities
23,441
5,664
5,872
Increase (decrease) in long-term loans
(2,848)
(2,848)
Proceeds from share capital increase
(992)
-
-
-
Others
(885)
1,264
-
-
(1,245)
(1,339)
Dividend paid
(1,793) (12,115)
16.7%
13.2%
9.4%
Net cash provided by financing activities
(5,191)
(9,937)
(4,092)
(4,187)
Net profit grwoth (%)
8.9% 616.7%
-75.8%
3.7%
Net increase (decrease) in cash
(1,143)
15,685
(2,030)
(2,043)
EBITDA margin (%)
26.7% 163.8%
35.0%
33.1%
Net profit margin (%)
26.7% 163.8%
35.0%
33.1%
Revenue growth (%)
10.3%
314
6,322
(18,333)
-
0.82
664
6,219
-
-
0.79
2,191
4,880
-220
(1,580)
3.28
(504)
6,809
Increase / Decrease in other investment
(33)
0.46
502
Increase / Decrease in short term investmen
(314)
3,271
5,872
4,002
5,083
EBIT
2017F
Depreciation and Amortization
5,115
Share profit from equity method
2016F
Net Profit
7,555
Operating profit
2015F
CF from Operation
Statement of Income (million Baht)
Statement of Financial Position
Quarterly
1Q14
2Q14
3Q14
4Q14
End 31 Dec
Revenue from operation
2,956
3,026
3,080
3,207
Cash and cash equivalents
2,395
18,080
16,050
14,007
Cost of service
1,160
1,186
1,141
1,226
Account receivables
3,169
3,698
4,186
4,579
Operating profit
1,796
1,841
1,938
1,980
Inventories
27
53
65
72
40
31
33
39
3,555
3,626
3,699
3,773
PP&E
13,087
13,612
14,895
15,912
Total assets
22,982
58,127
58,116
57,749
7,720
Other revenue
2014
Other current assets
2015F
2016F
2017F
0
0
0
0
1,102
1,165
1,194
1,185
78
88
67
63
182
186
209
183
Account payables
2,950
5,759
6,962
12
-4
2
19
Other Liabilities
1,520
1,550
1,581
1,613
853
886
921
958
Total liabilities
10,055
15,004
13,400
11,347
FX gain / loss
0
-1
1
-14
Other extraordinary profit
0
0
0
-37
Issued and paid-up share capital
3,569
3,569
3,569
3,569
Net profit
853
885
648
903
Share premium
EPS
0.12
0.12
0.09
0.13
Retained earnings
0.5%
12.6%
2.4%
3.8%
1.8%
-26.8%
4.1%
39.3%
60.8%
28.8%
60.8%
29.3%
62.9%
21.0%
61.8%
28.2%
End 31 Dec
2014
2015F
2016F
2017F
Current Ratio (x)
1.08
1.73
1.83
2.03
Other expense
EBIT
Interest expense
Tax expense
Minoritiy
Norm profit
Revenue growth (%)
Net profit grwoth (%)
EBITDA margin (%)
Net profit margin (%)
Financial Ratio
0.78
0.35
0.30
0.24
14.6%
57.8%
9.7%
10.1%
ROAE (%)
25.8%
83.6%
12.9%
12.9%
Source :Financial Statement / ASP
225 -
225 -
225 -
225
9,276
19,610
24,030
28,563
Total shareholders' equity
12,927
43,123
44,717
46,402
Total liabilities and shareholders' equity
22,982
58,127
58,116
57,749
Assumption
ROAA (%)
D/E Ratio (x)
-
End 31 Dec
2014
2015F
2016F
2017F
Broadband internet subscribers ('000)
1672.1
1936.1
2200.1
2360.1
APU Broadband service
589.92
595.00
595.00
595.00