ADVANC share price is poised to continue to outperform the SET, backed by expected strong earnings in 2Q-3Q23F undergirded by easing competition and work to control costs. The expected interim dividend of Bt3.5/sh (1.6% yield) cushions against downside in the near-term. Maintain OUTPERFORM with a DCF-based TP of Bt225 (6% WACC and 2% LTG).
Catalysts.
- Mobile blended ARPU is poised to grow QoQ for the first time in six quarters as competition in the mobile segment continues to simmer down. Starting packages for the postpaid segment have risen to Bt399/mth vs Bt299/mth and in the prepaid segment, it will stand pat on prices for starting packages, but reduce the amount of voice and data offered. These will grow mobile blended ARPU QoQ, with mobile revenue moving up 2% QoQ and 2.1% YoY to Bt29.8bn. Handset sales are expected to fall 11.3% QoQ and be relatively flat YoY at Bt8.8bn as there was no new phone model launched in the quarter.
- Competition in fixed broadband (FBB) is also less intense, with starting packages now priced at Bt500/mth from Bt299/mth in the past, underwriting QoQ growth in ARPU. 2Q23F revenue is expected at Bt2.8bn, up 3% QoQ and 12.2% YoY.
- Cutting costs will continue to steadily bolster profitability. We expect cost of service (including network OPEX and depreciation) to grow 0.9% QoQ and 2.4% YoY to Bt22.2bn, with the YoY increase due to higher electricity cost. Cost cutting – specifically on marketing - is expected to pull SG&A down 7% QoQ and 9% YoY to Bt5.2bn.
- Based on the eased competition, we expect strong 2Q23F core earnings at Bt7.3bn, growth of 8.7% QoQ and 12.9% YoY. We expect core service revenue to grow 2% QoQ and 2.7% YoY, which is slightly below our full-year forecast of 3% and management’s target of 3-5%. At the same time, the improvement in business outlook should bring revenue up to meet our full-year forecast. Based on our 2Q23F, 1H23F core profit would account for 51% of our 2023F, putting it on track to meet forecast. Results will be released on Aug 7, at which time we expect it to announced an interim dividend of Bt3.5/sh. We stand by our 2023F core profit forecast of Bt27.4bn, up 5.1%.
Action & recommendation. We believe the easing competition and the interim dividend will continue to support share price. We expect earnings to grow QoQ and YoY again in 3Q23F. Hence, we maintain our OUTPERFORM rating with a DCF-based TP of Bt225.
Key risks. The resumption of intense mobile and FBB competition and policy risk from the new government, particularly placing a price cap on voice and data for companies offering mobile phone service.
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