Date and Broker Information
Report Date: October 28, 2024
Broker: Maybank Securities (Thailand) PCL
Company Overview
TRUE Corp is Thailand’s largest telecommunications operator, formed through the merger of the former TRUEE and DTAC, officially completed on March 1, 2023. TRUE provides a full suite of mobile, fixed-broadband, and content services, capturing 52% of the Thai mobile revenue market share as of 2Q24.
Financial Highlights
- 3Q24 Core Profit Beat Forecasts: TRUE Corp reported a core profit of THB 2.9 billion in 3Q24, exceeding forecasts of THB 2.4 billion due to lower-than-expected expenses.
- Profit Growth Forecast for FY25: TRUE Corp anticipates a significant 89% core profit growth in FY25, bolstered by operational efficiencies and expected cost controls.
- Revenue Breakdown:
- Mobile Services: Stable, with slight decreases in postpaid revenue balanced by increased tourist-related revenues.
- Fixed Broadband (FBB): Experienced growth of 1.5% QoQ, driven by subscriber additions and ARPU improvements.
- Pay TV: Revenue remained stable.
Strategic Updates and Financial Performance
- 4Q24 Profit and Stability: TRUE forecasts core profit stability for 4Q24, maintaining the same profit levels as 3Q24 at THB 2.9 billion, with expected revenue stability and balanced cost structures.
- FY24 Core Profit Adjustment: The company revised FY24 core profit upward by 10%, benefiting from reduced SG&A expenses and narrowed losses on handset sales.
- Capital Structure: Post-merger, TRUE’s net-debt-to-EBITDA ratio is projected to decrease, targeting a 4.4x ratio by FY24, supported by debt repayments and EBITDA growth.
Investment Valuation and Recommendation
- Target Price and Rating: Maybank Securities reiterates a “BUY” rating for TRUE Corp, raising its target price to THB 13.30 (up from THB 12.80). The valuation is based on a discounted cash flow (DCF) model, applying a WACC of 7.6% and a terminal growth rate of 2%.
- Comparative Advantage: TRUE is preferred over competitor ADVANC due to its lower FY24-26E EV/EBITDA ratios, strong quarterly earnings momentum, and the potential for upward earnings revisions.
Operational Performance and Cost Efficiency
- Mobile Service Performance: Mobile revenue was steady, representing 79% of the company’s revenue, while ARPU increased by 5.5% YoY to THB 211 per month. Subscriber growth in the tourist sector offset the decline in prepaid plans.
- Broadband and Pay-TV Growth: TRUE’s broadband subscriber base and ARPU saw sequential growth, with the company raising entry-level FBB package prices to THB 599 monthly.
- Cost Management Initiatives: TRUE reduced network opex and SG&A expenses, benefiting from synergies achieved post-merger and targeting further cost reductions in network and interest expenses.
Environmental, Social, and Governance (ESG) Commitments
- Sustainability: TRUE is a recognized leader in sustainability in the Thai telecom sector, having been included in the FTSE4Good Index and the Dow Jones Sustainability Emerging Market Index. Its ESG initiatives include reducing electricity consumption and aiming for carbon neutrality by 2030.
- Employee Initiatives: TRUE has an Employee Joint Investment Programme and emphasizes gender diversity, with approximately 60.4% of its workforce being women.
Financial Forecasts and Key Ratios (FY22-26E)
- Revenue: Expected to slightly decline by 2.2% in FY25E to THB 201.5 billion.
- EBITDA Growth: Projected to increase by 14.2% in FY24E and an additional 7.4% in FY25E.
- Core Net Profit: Anticipated to reach THB 16.5 billion by FY25E, a marked improvement from prior losses.
- Debt Reduction Goals: TRUE aims to lower its net-debt-to-EBITDA to 4.5x by 2025, supported by continuous debt repayment and EBITDA growth.
Key Risks and Upside Factors
- Risks: Potential recessionary impacts and post-merger integration costs could pose risks to profitability. Additionally, rising competition in mobile services could impact market share and profit margins.
- Upside Potential: Earnings upgrades by consensus analysts, easing mobile market competition, and successful synergy realizations in network and operations could drive significant value.
This summary provides a comprehensive view of TRUE Corp as analyzed by Maybank Securities on October 28, 2024.
