Price (Bt) 1.70
Target (Bt) 0.80
Set Index 550.51
2 consecutive norm losses and forecast 23% earnings drop for 2009
Maintain SELL rating
With the impact from the weak economy and inventory clearance sales,
SIM had two consecutive
normalised loss results in 4Q08 and 1Q09. Although we expect this is already the bottom after completion of
the clearance sales, we are still reiterating our SELL rating based on the remaining weak outlook and a
current share price far above our Bt0.80/share fair value. Furthermore, we believe that it will not be easy
to expand business overseas given the strong competition from Chinese handset brands. In addition, we
still expect earnings to fall by 23% from last year to Bt164mn or Bt0.04/share.
Hurt by weak economy and stock clearance sales
The SIM handset business was significantly hurt by the weak economy and the declining consumer
confidence. Sales volume fell to a three-year low of 776,000 units in1Q09 (675,000 local sales and 111,000
overseas). Furthermore, the average sales price is still declining, down 5% yoy to Bt2,437 overall and to a
new low of Bt2,129 in the domestic market. Pressure was felt from the clearance sales after a very high
inventory level at the end of last year. Hence, the company operating revenue dropped significantly by 33%
from the same period of last year and 30% from the previous quarter to Bt2.1bn, while the gross margin fell
from 17.6% in the same period of last year and 13.3% in the previous quarter to only 9.9%.
Content grows continuously
On the other hand, the content business has grown continually. Revenue rose 8% yoy to Bt186mn in
1Q09, thanks to the popularity of the horoscope content and a more preferable adjustment in revenue sharing
conditions. This is, however, unlikely to fully compensate for slower handset sales.
Bt10mn net profit, but a Bt70mn normalised loss in 1Q09
Although the company successfully lowered SG&A by 21% from the same period of last year and by 5%
from the previous quarter to Bt296mn in 1Q09, performance was still very weak with a Bt70mn normalised loss
compared to a Bt16mn normalised loss in the previous quarter and a Bt139mn normalised profit in the same
period of last year. After adding a Bt17mn forex gain, a Bt46mn gain from the sale of an investment and a
Bt17mn gain from an investment in securities, the SIM 1Q09 net profit becomes Bt10mn. In addition,
performance should party recover later this year with the plan to launch several new high-feature phones
later this year, as well as, the end of the clearance sales.
Earnings summary
2006 2007 2008 2009F 2010F
Sales 24,347 15,227 11,151 10,204 11,820
EBITDA (Btmn) 875 769 527 482 524
Normalised Profit 434 393 214 164 205
Net Profit 488 321 114 244 205
Normalised EPS (Bt) 0.1 0.09 0.05 0.04 0.05
EPS (Bt) 0.11 0.07 0.03 0.06 0.05
PER (x) 15 22.8 64.1 30 35.6
EV/EBITDA (x) 2.7 3 7.2 15.7 15.3
CF/share (Bt) 0 0.1 -0.2 0.4 0
BV per shr (Bt) 0.6 0.6 0.5 0.5 0.6
Price/BV (x) 3.1 3 3.2 3.1 3
DPS (Bt) 0.062 0.062 0.035 0.035 0.045
Dividend yield (%) 3.60% 3.60% 2.10% 2.10% 2.60%
Gearing 0 net cash 0.6 0.1 0.3
ROA (%) 8.40% 4.80% 1.80% 3.90% 3.10%
ROE (%) 21.60% 13.30% 4.90% 10.50% 8.60%
Source : Company reports and KELIVE Research estimates
By Kim Eng Securities (Thailand) Company Limited on May 26, 2009
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