Shin Corporation Plc. (SHIN)
last week reported a 2002 net profit of Bt5.3bn, an increase
of 87% from 2001. This was 15% higher than our forecast of
Bt4.6bn, which largely stemmed from higher contributions
from 43%-owned Advanced Info Service Plc. (ADVANC).
ADVANC’s contribution
represented 93% of SHIN’s net profit in 2002, up from 52%
in 2001. However, SHIN’s real cash flow will come from
ADVANC's dividend payment of Bt1.55 per share. After setting
aside a sinking fund reserve for debenture repayment and
some other expected cash expenses, SHIN will, in turn, pay
out a dividend to shareholders of Bt0.5 per share,
representing a 4.2% dividend yield at the current market
price. This good news is one of the reasons that SHIN's
share price has rebounded by 14% over the last couple of
days.
Figure 1: SHIN’s earnings report
|
Bt,mn |
4Q02 |
3Q02 |
QoQ |
4Q01 |
YoY |
FY02 |
FY01 |
FY02E |
YoY |
%Diff |
|
Service revenues |
96 |
76 |
26.0% |
138 |
-30.0% |
337 |
604 |
324 |
-44.2% |
3.9% |
|
Cost of services |
28 |
27 |
3.4% |
108 |
-73.8% |
113 |
542 |
114 |
-79.1% |
-1.1% |
|
SG&A |
-7 |
104 |
-106.6% |
9 |
n/a |
183 |
403 |
230 |
-54.6% |
-20.6% |
|
EBIT |
75 |
-55 |
n/a |
20 |
266.7% |
41 |
-341 |
-20 |
n/a |
n/a |
|
Interest expense |
46 |
52 |
-12.0% |
43 |
5.3% |
199 |
151 |
220 |
32.1% |
-9.7% |
|
Other income (expenses) |
-32 |
14 |
n/a |
27 |
n/a |
359 |
2,198 |
453 |
-83.7% |
-20.9% |
|
Income tax |
0 |
0 |
n/a |
4 |
n/a |
0 |
115 |
0 |
n/a |
n/a |
|
Unconsol
profit |
-3 |
-93 |
-96.5% |
0 |
n/a |
201 |
1,591 |
213 |
-87.4% |
-5.6% |
|
Gains from subsidiaries |
1,589 |
1,303 |
21.9% |
-776 |
n/a |
5,081 |
1,229 |
4,373 |
313.4% |
16.2% |
|
Net
earnings |
1,586 |
1,210 |
31.0% |
-775 |
n/a |
5,282 |
2,820 |
4,586 |
87.3% |
15.2% |
Source: SHIN and Kim Eng research
We expect ADVANC to produce a
15-20% growth in earnings this year due to its ability to
maintain ARPU, obtain additional revenue sources from
non-voice businesses and gain more practicable synergy in
roaming with DPC’s 1800MHz network.
We are concerned about the
earnings growth potential of the other companies in the group,
however. Excluding ADVANC, SHIN’s net results would have
decreased by 45% from 2001. We don’t expect to see a big
jump of net results from these companies in 2003, either,
leaving ADVANC to be SHIN's sole earnings driver in 2003.
Figure 2: SHIN’s earnings breakdown
|
Group
companies |
4Q02 |
3Q02 |
QoQ |
4Q01 |
YoY |
FY02 |
FY01 |
FY02E |
YoY |
%Diff |
|
AIS |
1,620 |
1,259 |
92.2% |
-793 |
216% |
4,913 |
1,458 |
4,003 |
237.0% |
22.7% |
|
SATTEL |
134 |
179 |
-8.7% |
198 |
-33% |
711 |
774 |
876 |
-8.1% |
-18.9% |
|
DPC |
0 |
0 |
n/a |
0 |
n/a |
0 |
-535 |
0 |
n/a |
n/a |
|
iTV |
-131 |
-144 |
61.8% |
-132 |
20% |
-555 |
-465 |
-498 |
19.4% |
11.3% |
|
ADVenture |
-107 |
-20 |
436.3% |
-43 |
-31% |
-173 |
-12 |
-91 |
1342% |
91.0% |
|
Others |
73 |
29 |
151.9% |
-6 |
n/a |
185 |
9 |
83 |
1956% |
123.1% |
|
Total |
1,589 |
1,303 |
64.3% |
-776 |
289% |
5,081 |
1,229 |
4,373 |
313.4% |
16.2% |
Source: SHIN and Kim Eng research
SATTEL’s net profit is not
expected to recover in 2003 due to the potential loss of a big
transponder clients – the Indian government, higher
operating costs from marketing iPSTAR and lost opportunity
from the shortage of Ku-band capacity on Thaicom 3 satellite.
According to management, however, the company does have
insurance coverage for the loss of Thaicom 3 transponders. The
only positive news from SATTEL will likely be the reemergence
of its Internet venture CS LoxInfo, which will get its public
launch this Thursday. This year, we expect SATTEL to post flat
earnings of Bt1.5bn.
We should see some improvement
in SHIN's subsidiary ITV, but the company most likely will
continue to make losses this year. ITV has made gains in
viewer share after changing its format more towards
entertainment. However, a turnaround isn't likely until the
company renegotiates its concession and high revenue-sharing
terms. We are currently forecasting ITV to record a loss this
year of Bt688mn.
SHIN scaled back its investment
in the dot-com business through AD Venture (ADV). The company
ceased operations of ArcCyber, ISP and IDC and then
transferred its existing customers to CS Loxinfo. SHIN has
already written off Bt91mn in unrecoverable assets of ADV in
2002, raising loss contributions from Bt12mn to Bt173mn in
2002. SHIN, instead, is focusing more on low capital
investment projects such as content and application providers
through its arm SHINEE. We expect to see a lower from ADV’s
this year.
Assuming no big change in its
top line, SHIN’s net profit is expected to increase by 22%
to Bt6.4n in 2003 mostly from ADVANC’s contributions. Based
on our assumption, SHIN is trading on a steep 33% discount to
our RNAV estimate of Bt18. It is also trading at a very cheap
2003 PER of 2.19x and P/BV of 1.08x. BUY
Figure
3: SHIN’s share performance in 2002-2003
Source: SHIN and Kim Eng research
Figure
4: SHIN’s NAV vs market value
Source: SHIN and Kim Eng research
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