Shares of Total Access Communications Plc, the operator of Thailand’s 3rd largest mobile phone operator – DTAC, rose and become one of the most traded shares in the morning and early afternoon trade after the company reported earnings and announced interim dividend.
Shares of DTAC were up to around 41.75 baht a share during the early morning trading today before paring some of its gains to trade around 40 baht a piece amid euphoria among investors who had been snapping up the shares in a market where there is a lack of good news.
DTAC late yesterday reported its 2nd quarter revenues and profits with the operator that has around 19 million subscribers announced that its profits stood at 1.89 billion baht for the 3-months ending June 2020 from 1.57 billion it had reported for the same period last year. For the 6-months ending June the profits of DTAC stood at 1.43 baht per share against 1.21 baht share for the 2.37 billion shares the company has.
The rise in the earnings per share (EPS) comes on the back of sharp decline in the economic activities in Thailand that has been subject to an economic slowdown that economists expect the gross domestic product (GDP) to shrink by double digits during the course of this year.
The rise in profits for the second-quarter of 1.89 billion baht, was 20 per cent higher year-on-year and 26 per cent quarter on quarter. DTAC said that it was going to pay 0.87 baht interim dividend with the dividends being paid to shareholders whose names appear on the registrar list on July 29 although the XD on the shares would be on July 24th.
The company accepted that it has seen a decrease in services and sales from the impact of COVID-19 results as a revenue drop by 4.6% in the quarter in comparison with last year although the saving grace for the company was its cost cutting that helped it go record higher profit.
To make matters worse DTAC recorded a net loss of 835,000 subscribers bringing its total subscriber base to a mere 18.8 million.
The company said that among the other for the decline in the number of subscribers was the intense competition among prepaid systems and stable monthly users.
On 4G-2300MHz network, the number of subscribers under cooperation with TOT constantly rose from people working from home. The number of 4G network users stood at 11.4 million, accounting around 60% of the total numbers.
Brokers remain skeptical
Despite the rise in the share price, brokers are mostly negative on the future prospects of the company and are recommending ‘reduce’ or ‘hold’ on the shares of the company.
Phatra Securities came out with a research report suggesting that it rated DTAC ‘underperform’ citing the intense competition in the market and the fact that DTAC has been losing customers left, right and center.
The broker cited that the not so good coverage of DTAC in the rural parts of Thailand was its weakest link and that by the time DTAC extends its network to the rural parts of the country, the mobile phone market in Thailand may reach its saturation point.
Phatra put a price of 35 baht a share, a 12.5 per cent discount to the current trading price.
Phatra Securities research shows that the major concern is the weak revenue as DTAC has lost more than 800,000 subscribers in 2Q20 which equals to 4 per cent of subscriber base coupled with DTAC losing 5G launch market share in remainder of 2020. The company’s revenue excluding IC dropped by 3.6 per cent YoY and 4.5 per cent QoQ. Phatra Securities earlier estimated 1 per cent of YoY decline.
Bualuang Securities on the other hand came out to say that it was revising its net profit estimates for DTAC by 9 percent to 6.32 billion baht and core profit by 3 per cent to 5.87 billion baht. The discounted cash flow (DCF) based target price has risen up from 48.5 baht to 52 baht.
The 2020 projection is 3.4 per cent YoY drop in service revenue, 1 per cent YoY rise in EBITDA and 10billion baht in CAPEX.
The report mentioned the early signs of recovery of monthly active users and revenue in May through June, but the revenue growth prospects are still cautious in the uncertain second half of 2020 due to the economic disruption.
For 3Q20, Bualaung Securities projects a 1.75 billion baht post-TFRS16 core profit, up 7% YoY and 11% QoQ due to lockdowns ease, resulting in the large demand for new SIM, handsets and devices.
Besides Bualuang, KGI Securities analysts suggest buying DTAC shares with a target of 47 baht after the 2Q20 performance report is 49 per cent higher than KGI’s estimate.
