Company Update
Thursday, September 30, 2021 I V Global Securities Public Company Limited
True Corp Plc (TRUE) Rating: HOLD Fair price: Bt4.23 Close price: Bt4.00
In refinancing mode Company Information Event: True Corp (TRUE) recently submitted a filing to the Office of the Ticker: TRUE TB Securities and Exchange Commission (SEC) to offer up to Bt24bn of Sector: ICT unsecured senior bonds with distribution to general and institutional Shares outstanding (m): 33,368.20 investors in a total of five series with annual coupon rate of 2.75%-4.6%; Market capitalization (Btm): 133,472.78 four offered to general and institutional investors and one for institutional Trading vol/day (‘000 shares): 115,588.06 Free float (%): 31.78 investors only. The debentures were assigned a rating of "BBB+" with a Beta: 1.08 stable outlook by TRIS Rating on 30 Aug. The subscription period is expected from 11-14 Oct 2021.
Funding terms: There will be five series of senior bonds. Details are as Major Shareholders follows. The three-year tenor debenture due in 2024, worth up to Bt8bn, CP Group and related 38.0% will have a coupon rate of 3.20% p.a. The four-year tenor debenture China Mobile International 18.0% worth up to Bt8bn will carry a coupon rate of 3.6% p.a. The five-year
tenor debentures worth up to Bt8bn will provide a higher coupon rate of 4.05% p.a. The seven-year tenor debentures worth up to Bt8bn will Consensus Bloomberg provide a higher coupon rate of 4.6% p.a. 2021F EPS (Bt): -0.05 The two-year debenture due in 2023 worth up to Bt1.5bn (for
Target price (Bt): 3.41 institutional investors only) will provide a coupon rate of 2.75%. The fifth
set of debentures will offer semi-annual coupon payments while the
Price Performance remaining sets will offer quarterly coupon payments. 52 Wk high/low: 4.16/ 2.66 The new debenture issuance is expected to be used to refinance existing
debts (of Bt20.3bn) and support future expansion within the group. As of 1M 3M 1Y YTD June 2021, the consolidated net D/E ratio was at 2.7x. TRUE spent Absolute (%) 20.5 32.5 27.4 16.3 Bt19.6n on capex during 1H21. The group had consolidated interest- Relative (%) 21.8 27.7 -0.6 4.7 bearing debts of Bt252bn, with average cost of funds at about 5%-plus.
In terms of market speculation about TRUE acquiring DTAC shares, we
150 see a limited chance of TRUE borrowing more to finance the acquisition since its current gearing ratio is already high. TRUE itself doesn’t plan to 125 divest more assets to associates in the near-term. There might be a possibility of the two entities forming a business alliance to share network 100 and operating expenses to boost profitability. TRUE has substantial frequency spectrum in its portfolio while DTAC lacks 5G spectrum even 75 though the necessity for it for 5G applications is at an early stage.
Maintain HOLD. We expect TRUE to continue to report net losses near 50 term with an operating loss of about Bt600m a quarter. Management strongly believes the company will see an earnings turnaround next year. 25 We prefer to maintain our current earnings estimates for TRUE with the potential of positive bottom-line profit resuming in 2022F. We keep our
TRUE SET HOLD rating with a revised price target of Bt4.23 (from Bt3.39), which is based on 6.5x EV/EBITDA for 2021F. The main risk to our earnings lies with rising price competition, particularly for mobile phone services. Rating CGR 2020 Thai CAC Investment summary TRUE Certified FY 31 Dec 2018 2019 2020 2021F 2022F 2023F Revenues (Btm) 161,820 140,943 138,212 142,657 145,971 148,246 Change (%) 16.0 -12.9 -1.9 3.2 2.3 1.6 Net profit (Btm) 7,035 5,637 1,048 (1,685) 87 1,413 Change (%) 1,175.9 (19.9) (81.4) (260.7) (105.2) 1,519.3 Analyst EPS (Bt) 0.211 0.169 0.031 (0.050) 0.003 0.042 Rattana Leenutaphong Change (%) 1,175.9 (19.9) (81.4) (260.7) (105.2) 1,519.3 [email protected] P/E (x) 19.0 23.7 127.3 n.m. 1,529.2 94.4 Tel: 662-658-5787 DPS (Bt) 0.09 0.09 0.07 - - - Yield (%) 2.3 2.3 1.8 - - - EV/EBITDA (x) 4.8 8.8 6.4 6.4 5.8 5.9 BVPS (Bt) 3.99 3.76 2.55 2.50 2.50 2.54 P/BV (x) 1.0 1.1 1.6 1.6 1.6 1.6 ROE (%) 5.28 4.50 1.23 (2.02) 0.10 1.66 ROA (%) 1.42 1.08 0.17 (0.29) 0.02 0.27 Net D/E ratio (x) 1.01 1.30 2.36 2.68 2.45 2.51 Source: Company and IVG estimates The opinions and information contained herein are based upon sources believed to be reliable, but their accuracy, completeness or correctness are not guaranteed. This information is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered herein by this report. I V Global Securities Plc (“IVG”) accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or its content.
Company Update
Thursday, September 30, 2021 I V Global Securities Public Company Limited
Results Btm 2Q21 2Q20 % YoY 1Q21 % QoQ 1H21 1H20 % YoY Service revenue exc IC 26,648 26,611 0.1 26,868 (0.8) 53,516 53,192 0.6 Total service revenue 30,170 30,135 0.1 30,376 (0.7) 60,546 60,196 0.6 Sales 3,627 3,743 (3.1) 5,050 (28.2) 8,677 8,526 1.8 Total sales & service 33,797 33,878 (0.2) 35,425 (4.6) 69,222 68,722 0.7 Gross profit - service 6,797 6,635 2.4 6,734 0.9 13,531 12,961 4.4 Gross profit - sales (178) (572) (68.8) (267) (33.1) (445) (1,131) (60.7) SG&A (6,520) (6,912) (5.7) (6,686) (2.5) (13,207) (13,834) (4.5) EBITDA 14,687 13,060 12.5 14,054 4.5 28,741 25,279 13.7 Depreciation 11,066 10,385 6.6 10,765 2.8 21,831 20,279 7.7 Interest expenses (3,263) (3,279) (0.5) (3,124) 4.4 (6,387) (5,647) 13.1 Tax (19) (12) 55.1 (45) (57.6) (64) 13 (610.0) Associate profits 873 1,016 (14.1) 874 (0.1) 1,747 2,033 (14.1) Profit before non-recurring (689) (847) (18.6) (610) 12.9 (1,299) (1,675) (22.4) Non-recurring items (10) 2,109 (100.5) 29 (134.5) 19 2,776 (99.3) Net profit (299) 1,262 (123.7) (581) (48.6) (880) 1,101 (180.0) Source: Company and IVG estimates
Revenue breakdown Btm 2Q21 2Q20 % YoY 1Q21 % QoQ 1H21 1H20 % YoY TrueMove H 27,349 27,708 (1.3) 28,229 (3.1) 55,578 56,199 (1.1) Service revenue 20,171 20,171 - 19,937 1.2 40,108 40,265 (0.4) - Voice and Non-Voice 19,053 19,171 (0.6) 18,946 0.6 37,999 38,140 (0.4) - Interconnection revenue 382 389 (1.8) 366 4.4 748 778 (3.9) IR and others 1,118 1,000 11.8 991 12.8 2,109 2,125 (0.8) Network rental revenue 3,024 3,024 - 3,024 - 6,048 6,006 0.7 Product sales 3,772 4,125 (8.6) 4,902 (23.1) 8,674 9,151 (5.2) Intersegment elimination (1,494) (1,668) (10.4) (1,162) 28.6 (2,656) (3,134) (15.3) TrueMove H after elimination 25,855 26,040 (0.7) 27,067 (4.5) 52,922 53,065 (0.3) TrueOnline 9,767 9,431 3.6 9,726 0.4 19,493 18,673 4.4 Service revenue 9,587 9,239 3.8 9,564 0.2 19,151 18,340 4.4 - Broadband 7,317 6,676 9.6 7,191 1.8 14,508 13,205 9.9 - Others 2,271 2,562 (11.4) 2,373 (4.3) 4,644 5,134 (9.5) Network rental revenue (FOC) 118 111 6.3 118 - 236 220 7.3 Product sales 62 82 (24.4) 45 37.8 107 113 (5.3) Intersegment elimination (3,651) (3,627) 0.7 (3,315) 10.1 (6,966) (7,179) (3.0) TrueOnline after elimination 6,116 5,804 5.4 6,411 (4.6) 12,527 11,494 9.0 TrueVisions 2,381 2,642 (9.9) 2,588 (8.0) 4,969 5,256 (5.5) Service revenue 2,381 2,642 (9.9) 2,588 (8.0) 4,969 5,255 (5.4) - Subscription and installation 1,463 1,714 (14.6) 1,576 (7.2) 3,039 3,559 (14.6) - Music entertainment & others 918 928 (1.1) 1,015 (9.6) 1,933 1,696 14.0 Product sales ------Intersegment elimination (555) (608) (8.7) (640) (13.3) (1,195) (1,093) 9.3 TrueVisions after elimination 1,826 2,034 (10.2) 1,947 (6.2) 3,773 4,163 (9.4) Normalized consolidated revenues 39,497 39,781 (0.7) 40,543 (2.6) 80,040 80,128 (0.1) Total intersegment elimination (5,700) (5,904) (3.5) (5,118) 11.4 (10,818) (11,407) (5.2) Normalized consolidated revenues - Net 33,797 33,878 (0.2) 35,425 (4.6) 69,222 68,722 0.7 Source: Company and IVG estimates
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Company Update
Thursday, September 30, 2021 I V Global Securities Public Company Limited
I V Global Investment Research – Recommendation Definitions
Sector Recommendations Stock Recommendations OVERWEIGHT: The industry, as defined by the analyst's BUY: Expecting positive total returns of 15% or more over the next 12 coverage universe, is expected to outperform the relevant months. primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage HOLD: Expecting total returns of not more than -10% to +10% over the universe, is expected to perform in line with the relevant primary next 3 months. market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's SELL: Expecting negative total returns of 15% or more over the next 12 coverage universe, is expected to underperform the relevant months primary market index by 10% over the next 12 months.
Anti-corruption Progress Indicator Definitions
Level 5 Extended Extension of the anti-corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases
Level 4 Certified Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 3 Established Carrying out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes. (3A: Established by Declaration of Intent, 3B: Established by Internal Commitment and Policy) Level 2 Declared Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 1 Committed Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws Partially progress Insufficient or not clearly defined policy No progress Data not available / no policy
Corporate Governance Report (CGR)
Excellent
Very good
Good
Disclaimers
The disclosure of the survey result of corporate governance, which is surveyed by the Thai Institute of Directors Association ("IOD"), and the Anti-Corruption Progress Indicators, which is assessed by Thaipat Institute, are the disclosure of the survey or assessment result based on the information received from the listed company that was stipulated in the form for Annual Corporate Governance Report of Thai Listed Companies (CGR) and the form for the assessment of Anti-corruption that refers to the Annual Registration Statement (Form 56-1), Annual Report (Form 56-2) or other relevant documents or reports of such listed company (as the case may be). The survey or assessment result is based on the information of the listed company, which is disclosed to the public and can be accessed by all investors, and is made in order to comply with the policy of the Office of the Stock Exchange of Thailand. Nevertheless, the survey or assessment result is made from the perspective of the IOD or Thaipat Institute that are the third party only. It is not an assessment of operation of the listed company and is not based on any inside information." Since this survey or assessment result is only the survey or assessment result as of the date appearing in the survey or assessment result only, it may be changed after that date or when there is any change to the relevant information. Nevertheless, I V Global Securities Plc. (IVG) does not confirm, verify, or certify the accuracy and completeness of the survey or assessment result.
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