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| | | January
30, 2003 |
Cambodian riot unlikely to
significantly affect listed Thai companies
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We expect to see Thai stocks slip today as investors react to last
night’s rioting in Phnom Penh that damaged the Thai embassy and several Thai
businesses. It is difficult to assess the damage to property, diplomatic
ties and business prospects at this time. We assume that diplomatic efforts
will be made on both sides to avoid any further deterioration in
relationships.
Only a handful of listed Thai companies have significant operations in
Cambodia – SATTEL, SAMART and THAI. Although selling pressure could hit
these three stocks, we are not changing our recommendations, valuations or
earnings forecasts at this time until more information is available.
SATTEL < Bt14.50 : ACCUMULATE >
Among Thai companies, Shinawatra Satellite (SATTEL) has one of the
largest exposures to Cambodia with a 100% stake in Cambodia Shinawatra (CAMSHIN)
held through Shinninton (Singapore). CAMSHIN is the second largest mobile
service operator in Cambodia with a subscriber base of 100,000.
As of September, SATTEL had a total investment in CAMSHIN of Bt611mn (not
including the inter-company loans). CAMSHIN had total assets of Bt1.8bn, or
10.76% of SATTEL’s consolidated total assets. In the first nine months of
2002, CAMSHIN produced revenue of Bt497mn, representing 12.2% of SATTEL’s
revenue.
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SATTEL's investment in Cambodia |
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Cambodia Shinawatra |
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Mobile service business |
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100% Holding |
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9M02 |
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CAMSHIN |
SATTEL |
Net portion |
|
Total Asset |
1,778 |
16,524 |
10.76% |
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Total Liability |
1,167 |
9,578 |
12.19% |
|
Total Equity |
611 |
7,054 |
n/a |
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|
|
|
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Total Revenue |
497 |
4,075 |
12.20% |
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Total Earnings |
76 |
1,159 |
6.56% |
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Source: Company data, Kim Eng research |
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CAMSHIN has a total of 230 staff of which 30 are Thai nationals. All Thai
executives returned to Thailand after the CAMSHIN’s head office was set
ablaze last night. The building damage will certainly be booked in the first
quarter, but we don’t believe that it will be sizeable write-off since none
of the company’s expensive electronic or transmission equipment was damaged.
We don’t think the rioting will affect day-to-day operations of CAMSHIN.
However, if rioting continues, we believe SATTEL will need to reassess
country risk and future investment schedule.
Our long-term valuation of SATTEL of Bt33 per share is still based on the
current operation of the company’s three satellites. Meanwhile, future
growth prospects will largely depend on its iPStar operation. As a result,
we are maintaining our ACCUMULATE recommendation on SATTEL.
SAMART < Bt9.60: HOLD >
In our view, SAMART has the biggest risk exposure in Cambodia in terms of
future business opportunities since the company’s growth prospects are
largely tied to its Cambodian mobile service and air traffic control
businesses.
In 1992, SAMART established 49%-owned Cambodia Samart Communication (CASACOM)
as a joint venture with Telekom Malaysia (TM) to provide cellular phone
service in Cambodia. CASACOM is the third largest operator in Cambodia with
about 80,000 subscribers.
In 2001, Cambodia Air Traffic Services (CATS) was granted a 22-year air
traffic control concession. CATS, a 60:40 joint venture between SAMART and
the government unit of Cambodia, started operation at the end of 2001.
As of September 2002, SAMART’s total equity investment in CASACOM and
CATS stood at Bt303mn and Bt107mn, respectively. In the first nine months of
2002, CASACOM accounted for 5.82% of SAMART’s total revenues and CATS 6.01%.
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SAMART's investment in Cambodia |
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Cambodia Samart Communication |
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Cambodia Air Traffic |
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Mobile service business |
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Air traffic control business |
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| 49%
Holding |
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60%
holding |
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| |
9M02 |
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|
9M02 |
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CASACOM |
SAMART |
Net portion |
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CATS |
SAMART |
Net portion |
| Total
Asset |
1,051 |
8,289 |
12.68% |
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Total
Asset |
695 |
8,289 |
8.38% |
| Total
Liability |
432 |
7,416 |
5.82% |
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Total
Liability |
588 |
7,416 |
7.93% |
| Total
Equity |
619 |
872 |
n/a |
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Total
Equity |
107 |
872 |
n/a |
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|
|
|
|
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| Total
Revenue |
337 |
6,471 |
5.21% |
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Total
Revenue |
389 |
6,471 |
6.01% |
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Total Earnings |
-34 |
-100 |
34.24% |
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Total Earnings |
8.36 |
-100 |
n/a |
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Source: Company data, Kim Eng research |
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|
Source: Company data, Kim Eng research |
SAMART’s management was not available for comment this morning. However,
from press accounts, some of CASACOM’s property was damaged during the
rioting. The extent of the damage is not yet known. Despite the uncertainty
and higher risks, we are maintaining our HOLD recommendation on
SAMART with a fair value estimate of Bt15 per share.
THAI < Bt31.50 : ACCUMULATE >
Thai Airways (THAI) announced this morning that it has temporarily
cancelled its flights to Cambodia and will make a decision on whether to
resume its flight schedule tomorrow.
THAI has only two flights each day to Phnom Penh, which contribute only
0.5% of the airline’s total revenue. THAI’s management said that all of its
Thai employees in Cambodia have already left the country and there was only
slight property damage.
We are maintaining our ACCUMULATE recommendation on THAI and fair value
estimate of Bt42 per share.
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Kim Eng Securities (Thailand) PLC. All rights reserved.
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