The ICT sector will benefit if JAS fails to pay for the 4G license. Meanwhile, weak Dollar is still supporting risky assets. SET Index may touch 1,390 pts. We recommend global plays (PTT, PTTEP, PTTGC, and SCC) and 1Q16 growth stocks (BDMS, ERW, IRPC, and CENTEL). Top pick is BDMS(FV@B25); we also recommend speculating LPH(FV@B9.1).
JAS's 900 MHz payment deadline. Good if JAS fails to pay. Top pick: ADVANC
Today (March 21) is the deadline for JAS 900 MHz payment. Entering the mobile business would put JAS at a great risk. The company is currently at a disadvantage when compared with the three existing operators from its expensive 900MHz license (B75bn excluding cost of network) and lack of subscribers; currently having no mobile subscribers and two million high-speed internet subscribers, it would be hard for the company to steal market shares from peers. Moreover, JAS would face net loss of B4.7bn in 2016, B5.6bn in 2017, and B5bn in 2018 and further net loss for many years.
If JAS fails to make the payment, it will be fined B600m and face sanction from the NBTC. However, the company would enjoy profit from the internet business of B3bn/year in 2016-2017 and competition between mobile operators would not intensify, which is good for the industry. Its fair value would rise from B2.8 to B5, excluding downside from legal claims from the NBTC if the future auction ends at lower price than the price JAS won. JAS would also repurchase its shares near B5, thus limiting its downside. However, whether JAS makes the first bid payment or not, it is still not attractive, so we reiterate SELL.
We favor ADVANC(FV@B187) after the Central Administrative Court allowed the company to use 900 MHz spectrum for 30 days until midnight of April 14, thus giving it more time to migrate its 400,000 subscribers and reducing ADVANC's expense from the roaming deal with DTAC for one month. This is probably the only ICT stock that still has an upside as high as 9% and dividend yield expected at over 7%, so it is good for long-term investment. INTUCH(FV@B75) is also favorable since it holds 40.45% ADVANC, its dividend yield can be expected at over 7%p.a, and its upside is as high as 18%.
Cabinet to boost economy via civil servant salary hike, benefiting Songkran
Amidst increasing liquidity worldwide as a result of easing monetary policies, the Thai government has continuously implemented economic stimulus measures. At a cabinet meeting tomorrow (March 22), the Ministry of Finance is proposing a Civil State Homes project, which aims to help people with low income who want to buy a house priced not over B1.5m by offering them loans at a lower-than-usual interest rate (B700,000 loan, with monthly instalment of B3,000 for the first three years). The project includes both long-term hire-purchases, using six locations from the Ratchaphatsadu land (the immovable state property), and outright sales, allowing private companies to join the project using their existing projects, e.g. a condominium unit priced not over B700,000 and a row house priced not over B900,000. However, positive sentiment from this issue on developers is insignificant, because they have to bear the cost from price reduction (at least 2%) and the transfer and mortgage fee, which would affect their net margin by 5%. Moreover, most of Ratchaphatsadu land is in provincial areas, which are not interesting for developers. This is different from the former project, Baan Eur Arthorn, from which developers got tax incentive. In conclusion, only PS and LPN may benefit from increasing sales (of existing house and condominium inventories) for they also focus on low-end customers.
In addition, the cabinet is proposing a measure to boost consumption (C) of the low and medium-level civil servants who do not have position allowance by giving them money for use during Songkran Festival, with a total budget of B15bn. The cabinet will also accelerate money injection through a village fund project phase 2 (B500,000m for each village, totaling B35bn); disbursement would continue until the end of the year. The factors to monitor from now on are the MPC meeting on March 23, at which the policy interest rate is projected to be kept unchanged at 1.5%, and the report of international trade, export (X) and import (M), in February, which are estimated at -9% and -10%, respectively.
Source: asiaplus.co.th / settrade.com
