1. business and industrial
2. company
3. earnings

Thursday, April 30, 2015
1Q15 Result Notes
Jasmine International
Insignificant normalized profit for the remainder of the 2014. SELL
JAS
Rec. : SELL
JAS's normalized profit is projected to make the year's low in 2Q15 and rebound slightly in
2H15 but drop from 3Q14-4Q14 though. The new 4G network business (if JAS wins the
bid) may result in down revision of earnings forecast and fair value. We reiterate SELL.
 JASIF boosts 1Q15 profit significantly, but weaker than expected
JAS's 1Q15 net profit made a record high of B12.8bn owing to B12bn
extraordinary profit from sales of assets to JASIF (40% lower than expected).
Additional profit was partially negated as JAS set a provision for the cost of asset
rental in the future (see page 2). Excluding extraordinary items, JAS's 1Q15
normalized profit was B783m, falling 18.3%qoq and 8.3%yoy. The number of
internet subscribers increased from 4Q14 by 80,000 (up 4.8%qoq, higher than
usual increase of 60,000 subscribers/quarter), boosting service revenue by
2.8%qoq. However, this was negated by cost of asset rental from JASIF, thus
slashing gross profit margin from 62.7% in 4Q14 to 52.1% in 1Q15. This is
compensated by non-operating income, e.g. profit sharing from JASIF (33.33%),
income from asset management in JASIF, and interest income that increased
from 4Q14 by B230m.
 Normalized profit to hit bottom in 2Q15, to rise slightly in 2H15
Current Price (B): 5.50
Target Price (B): 6.30
Upside : 14.5%
Dividend Yield : 2.2%
Total Return : 16.7%
Market Cap. (Bm) : 39,255
CG Score: NR.
Technical Chart
Although 1Q15 normalized profit made up 30.2% of the full-year forecast, 2Q15
normalized profit is projected to drop from 1Q15 and make a year's low since JAS
would fully recognize cost of asset rental from JASIF for the first quarter (starting
from February 10), while a growth in the number of subscribers would slow down
after ADVANC officially enters the internet competition. Then, JAS's normalized
profit is expected to rebound slightly in 2H15 solely because of growing number
of subscribers. We maintain our FY2015 normalized profit forecast at B2.7bn,
falling 24.6%yoy. Since JAS's extraordinary profit was lower than expected, we
revise down our earnings forecast, projecting JAS's net profit to skyrocket
440%yoy to B14.3bn in 2015, but then shrink 72%yoy in 2016.
 4G investment has downside. SELL
Investors are probably speculating on JAS to enjoy free JAS-W3 with the
theoretical value of B1.29 before the XW date of June 25 (not included in the fair
value). Although the fair value implies 14.9% upside, if JAS wins the 4G spectrum
bid in late 2015, its new 4G network business would face loss for at least two or
three years, depressing JAS's earnings and fair value. We reiterate SELL.
Key Data
FY: Dec 31
Sales & Services (Bm)
Net Profit (Bm)
Norm Profit (Bm)
Norm EPS (B)
Norm PER (x)
DPS (B)
Dividend Yield (%)
BV (B)
EV/EBITDA
FY13A
11,123.0
3,002.9
3,024.7
0.42
13.2
0.25
4.55%
1.72
6.81
FY14A
12,268.5
3,270.8
3,618.3
0.51
10.8
0.15
2.73%
1.81
6.21
FY15F
14,314.6
14,366.3
2,728.3
0.26
21.2
0.12
2.13%
2.77
5.39
FY16F
16,205.3
4,048.1
2,877.1
0.27
20.1
0.12
2.24%
3.03
5.25
FY17F
17,725.0
3,085.2
3,085.2
0.29
18.7
0.13
2.41%
3.20
5.08
ASP vs IAA consensus
ASP
2015F
0.26
2016F
0.27
EPS (B)
Cons
1.88
0.49
% diff
-86%
-45%
Source : IAA consensus and ASPS
Suwat Wattanapornprom
License No.: 044015
[email protected]
Source : ASP Research (FY2015 DPS, excluding B1.5/share extraordinary dividend already paid)
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we cannot guarantee their accuracy, adequacy, completeness and timeliness. The analyses and comments presented herein are opinions of our analysts and do not necessarily reflect the views of Asia Plus Securities.
 JASIF boosts 1Q15 profit significantly, but weaker than expected
JAS's 1Q15 net profit made a record high of B12.8bn owing to B12bn
extraordinary profit from sales of optical fiber cable to JASIF of approximately
815,000 core kilometers out of 980,000 core kilometers was recognized; transfer
of 800,000 core kilometers was booked on the contract date, while another
15,000 core kilometers is a part of 180,000 core kilometers of optical fiber cable
which will be gradually transferred for over two years. The aforementioned
extraordinary profit was 40% lower than expected (JAS set a provision for the 11year rental agreement valued B15.8bn which will be subtracted from JAS's
earnings; table of JAS's actual extraordinary profit versus our extraordinary profit
under our assumption is shown below).
Actual Earnings
Sales of assets
Less: Advance received for the future
assets
Net advance received
Costs of assets sales
Profit from assets sales
Less: Expenses related to assets sales
transactions
Gain on sales of assets before tax
Less: Provision for rental assurance on
delivery date
Less: Provision for entry fee for laying
the optical fiber cables
Less: Eliminating unrecognized profit in
proportion to the Company’s unit
holding (33.33% stake)
Gain on sales of assets to JASIF on
delivery date in the consolidated
financial statements
Less: Income tax
Net profit from assets sales
Less: Minority interest
JAS’s extraordinary profit
55,000
- 8,684
46,316
- 2,578
43,738
- 1,567
42,171
-15,822
- 520
Projected Earnings
Unit: Bm
Sales of assets
55,000
Costs of assets sales
- 3,200
Profit from assets sales
51,800
Gain on sales of assets before tax
51,800
Less: Income tax
- 10,000
Gain on sales of assets after tax
41,800
Less: Eliminating unrecognized profit
- 13,932
in proportion to the Company’s unit
holding (33.33% stake)
Net income from assets sales
27,868
JAS’s profit from transferred
22,294
assets (80% of total assets)
- 8,609
17,220
- 5,166
12,054
- 96
11,958
Excluding the aforementioned extraordinary profit, JAS's 1Q15 normalized profit
was B783m, falling 18.3%qoq and 8.3%yoy. The number of internet subscribers
increased from 4Q14 by 80,000 (higher than usual increase of 60,000
subscribers/quarter), boosting service revenue by 2.8%qoq. However, this was
negated by additional expenses after establishment of JASIF since cost of asset
rental was booked for the first quarter, thus slashing gross profit margin from
62.7% in 4Q14 to 52.1% in 1Q15. This is compensated by non-operating income,
e.g. profit sharing from JASIF (33.33%), income from asset management in
JASIF, and interest income that increased from 4Q14 by B230m.
 Normalized profit to hit bottom in 2Q15, to rise slightly in 2H15
Although improvement in the core business was seen in 1Q15 (e.g. the number of
internet subscribers increased more than usual), resulting in 1Q15 normalized
profit making up 30.2% of the full-year forecast, 2Q15 normalized profit is
projected to drop from 1Q15 and make a year's low since JAS would fully
recognize cost of asset rental from JASIF for the first quarter (starting from
February 10), while a growth in the number of subscribers would slow down after
ADVANC officially enters the internet competition. Then, JAS's normalized profit is
expected to rebound slightly in 2H15 as the number of subscribers would still
grow despite fiercer competition. We maintain our FY2015 normalized profit
forecast at B2.7bn, falling 24.6%yoy.
Since JAS's extraordinary profit from sales of assets to JASIF was lower than
expected (see the table above), we revise down our FY2015-2017 earnings
forecast. Under the new projection, JAS's net profit is estimated to skyrocket
440%yoy to B14.3bn in 2015, but then shrink 72%yoy in 2016.
 4G investment has downside. SELL
Investors are probably speculating on JAS to enjoy free JAS-W3 with the
theoretical value of B1.29 before the XW date of June 25 (not included in the fair
value). Although the fair value implies 14.9% upside, if JAS wins the 4G spectrum
bid in late 2015, its new 4G network business would face loss for at least two or
three years, depressing JAS's earnings and fair value. We reiterate SELL.
Operating profit by Quarter
Key data (Bm)
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
Sales & service revenue
Cost of sales & service
Gross profit
SG&A
Operating profit
Net profit
Normalized profit
Normalized EPS
Gross margin (%)
Normalized profit margin (%)
2,714
(1,070)
1,644
637
968
715
746
0.10
60.6%
27.5%
2,820
(1,153)
1,667
650
981
755
762
0.11
59.1%
27.0%
2,940
(1,216)
1,724
656
976
757
791
0.11
58.6%
26.9%
2,956
(1,160)
1,796
696
1,062
853
853
0.12
60.8%
28.8%
3,026
(1,186)
1,841
669
1,134
885
886
0.12
60.8%
29.3%
3,080
(1,141)
1,938
730
1,161
648
921
0.13
62.9%
29.9%
3,207
3,296
2.8%
(1,226) (1,603)
30.7%
1,980
1,693
-14.5%
795
771
-3.0%
1,146
863
-24.7%
903 12,771 1314.2%
958
783
-18.3%
0.13
0.11 -18.3%
61.8% 51.4%
29.9% 23.7%
1Q15
%qoq
%YoY
1Q15
1Q14
%YoY
11.5%
38.2%
-5.7%
10.7%
-18.8%
1397.7%
-8.2%
-8.2%
3,296
(1,603)
1,693
771
863
12,771
783
0.11
51.4%
23.7%
2,956
(1,160)
1,796
696
1,062
853
853
0.12
60.8%
28.8%
11.5%
38.2%
-5.7%
10.7%
-18.8%
1397.7%
-8.2%
-8.2%
Source: Financial Statement / ASP
Norm Profit Margin
ARPU by Quarter
35.0%
620
30.0%
610
25.0%
600
20.0%
590
15.0%
580
10.0%
570
5.0%
560
1Q58
1Q15
4Q14
3Q14
2Q14
1Q14
4Q13
3Q13
Norm Profit Margin
2Q13
550
1Q13
4Q57
3Q57
2Q57
1Q57
4Q56
3Q56
2Q56
1Q56
0.0%
ARPU
Source : JAS
Source : JAS
Old vs New Earning Forecast
New
ใหม่
14F
57F
Forecast
ประมาณการ
(Bm)
Net Profit (ลบ.)
(Bm)
Norm Profit (ลบ.)
(B)
Norm EPS (บาท)
Oldม
เดิ
15F
58F
14,366.3 4,048.1
2,728
2,877
0.26
0.27
Fair Value PER (X)
24.23
(B)
Fair Value (บาท)
6.30
Assumption
สมมติฐาน
Booked
14,315 16,205
การบั
นทึIncome
กรายได ้
Gross Margin
35.73% 31.37%
SG&A/Sale
23.55% 22.00%
กํExtraordinary
าไรพิเศษ Profit
11,638.0 1,171.0
14F
57F
Key Risk
%chg
% เปลี
ย
่ นแปลง
15F
58F
14F
57F
15F
58F
23,441.3 5,664.1 -38.7% -28.5%
2,728
2,877
0.0%
0.0%
0.26
0.27
0.0%
0.0%
24.23
0.0%
0.0%
6.30
0.0%
0.0%
14,315 16,205
0.0%
35.73% 31.37%
0.0%
22.36% 21.68%
5.3%
20,713.0 2,787.0 -43.8%
0.0%
0.0%
1.5%
-58.0%
1. As a result of fiercer competition, annual growth in
subscriber volume and ARPU may miss forecast.
2. There is still risk from legal issues: withdrawal of the
Supreme Court’s order to implement the rehabilitation
plan, thus giving the rights for JAS’s creditors to claim for
debt repayment (the Supreme Court has withdrawn the
order already, so creditor can demand debt payment any
time), or TT&T’s lawsuit against JAS, demanding JAS to
transfer shares in TTTBB back to TT&T (currently under
the court’s deliberation; this takes more than five years
before the conclusion can be made).
3. JAS’s new business (mobile service) may face loss.
Source : JAS
Source :ASP Research
2015-2017F Earning Forecast
Statement of Income (million Baht)
Statement of Cashf Fows (million Baht)
Revenue from operation
2014
12,268
2015F
14,315
2016F
16,205
2017F
17,725
Cost of service
(4,713)
(9,200)
(11,122)
(12,333)
7,555
5,115
5,083
5,392
Other revenue
143
276
320
347
Non cash items
Other expense
-
-
-
-
Increase / Decrease from operating activities
0
1,222
1,573
1,784
Net cashflow from operation
4,647
3,234
3,190
3,395
CF from investing
End 31 Dec
Operating profit
Share profit from equity method
EBIT
Interest expense
(297)
(151)
Tax expense
(760)
(335)
Minoritiy
Norm profit
FX gain / loss
Other extraordinary profit
Net profit
EPS
28
3,618
(20)
2,728
-
-
(291)
(22)
2,877
(290)
(20)
3,085
4,002
14,366
4,048
3,085
2,059
2,383
2,750
3,083
(16,874)
(504)
(3,213)
(1,455)
(1,411)
(3,337)
5,565
4,758
6,809
222
0
-220
74
0
0
Increase / Decrease in other investment
-
(18,333)
(157)
(178)
(2,541)
47,433
(5,000)
(5,000)
(2,761)
29,174
(5,157)
(5,178)
Sale (Purchase) of PP&E
Minority Interest
-
-
Net cash used in investing activies
-
-
Cash flows from financing activities
14,366
4,048
3,085
Increase (decrease) in long-term loans
0.29
502
Increase / Decrease in short term investment
-
0.39
2017F
Depreciation and Amortization
(1,580)
1.37
2016F
Net Profit
(33)
0.46
2015F
CF from Operation
(314)
3,271
2014
End 31 Dec
(1,521)
914
(2,848)
(2,848)
Proceeds from share capital increase
(992)
15,039
-
-
Others
(885)
1,264
-
-
(12,333)
(1,286)
(1,339)
Dividend paid
(1,793)
Net cash provided by financing activities
(5,191)
4,884
(4,134)
(4,187)
Net increase (decrease) in cash
(1,143)
30,721
(3,726)
(4,607)
Revenue growth (%)
10.3%
16.7%
13.2%
9.4%
Net profit growth (%)
8.9%
339.2%
-71.8%
-23.8%
EBITDA margin (%)
26.7%
100.4%
25.0%
17.4%
Net profit margin (%)
26.7%
100.4%
25.0%
17.4%
3Q57
3,080
4Q57
3,207
1Q58
3,296
End 31 Dec
Revenue from operation
2Q57
3,026
Cash and cash equivalents
2014
2,395
2558F
33,116
2559F
29,390
2560F
24,784
Cost of service
1,186
1,141
1,226
1,603
Account receivables
3,169
3,698
4,186
4,579
Operating profit
1,841
1,938
1,980
1,693
Inventories
27
53
65
72
31
33
39
147
3,555
3,626
3,699
3,773
PP&E
13,087
13,112
15,162
17,078
Total assets
22,982
76,513
75,651
73,698
5,115
Statement of Income (million Baht)
Other revenue
Other expense
EBIT
Interest expense
Tax expense
Minoritiy
Norm profit
FX gain / loss
Other extraordinary profit
Net profit
EPS
Revenue growth (%)
Net profit grwoth (%)
EBITDA margin (%)
Net profit margin (%)
Statement of Financial Position (million Baht)
0
0
0
0
1,165
1,194
1,185
1,130
88
67
63
69
186
209
183
210
Account payables
2,950
4,131
4,676
-4
2
19
-69
Other Liabilities
1,520
1,550
1,581
1,613
886
921
958
783
Total liabilities
10,055
47,487
43,841
40,142
-1
1
-14
31
0
0
-37
11,958
Issued and paid-up share capital
885
648
903
12,771
Share premium
0.08
0.06
0.09
1.22
2.4%
3.8%
1.8%
-26.8%
4.1%
2.8%
39.3% 1314.2%
60.8%
29.3%
62.9%
21.0%
61.8%
28.2%
51.4%
387.5%
2014
1.08
2015F
1.25
2016F
1.24
2017F
1.20
Financial Ratio
End 31 Dec
Current Ratio (x)
Other current assets
-
3,569
5,317
5,317
5,317
225
13,065
13,065
13,065
9,276
10,317
13,079
14,825
Total shareholders' equity
12,927
29,027
31,810
33,556
Total liabilities and shareholders' equity
22,982
76,513
75,651
73,698
Retained earnings
Assumption
End 31 Dec
2557F
2558F
2559F
2560F
0.78
1.64
1.38
1.20
Broadband internet subscribers ('000)
1672.1
1936.1
2200.1
2360.1
ROAA (%)
14.6%
28.9%
5.3%
4.1%
APU Broadband service
589.92
595.00
595.00
595.00
ROAE (%)
25.8%
68.5%
13.3%
9.4%
D/E Ratio (x)
Source :Financial Statement / ASP