Company Update

Friday, November 01, 2019 I V Global Securities Public Company Limited

Advanced Info Service Plc (ADVANC)

Rating : BUY Fair price: Bt257 Close price: Bt229
9M19 net profit rises 5%
Company Information  ADVANC reported stronger-than-expected net profit of Bt8.7bn (EPS of
Ticker: ADVANC TB Bt2.92) for 3Q19; +27.6% YoY and +12.3% QoQ. The results came in
Sector: ICT better than ours and the Bloomberg estimate of Bt8.4bn. 9M19 net profit
Shares outstanding (m): 2,973.18
of Bt24bn rose by 5.2% YoY, accounting for 77% of our full-year
Market capitalization (Btm): 680,857.91
Trading vol/day (Btm): 6,177.92
estimate. In summary, core service revenue grew by 7.2% YoY and
Free float (%): 36.22 came in flat QoQ in 3Q19 (pre-TFRS 15). EBITDA also rose by 19% YoY.
Beta: 0.67 However, stripping out a one-time adjustment from the TOT contract of
Bt383m, core earnings remained strong at Bt8.34bn, up 20% YoY.
 Regarding the 5G auction, the company expects 5G rollout on a case-by-
Major Shareholders
Intouch Holdings Plc 40.45%
case basis depending on the business use case application and location.
Singtel Strategic Investment 23.32% Management is still confident that future capex requirements for 5G and
Thai NVDR 6.54% spectrum cost payments will not impact dividend payments. However,
there would be further discussion with more details after public hearings
to be held this month and in December.
Consensus Bloomberg
 Management has maintained 2019 key guidance. Core service revenue
2019F EPS (Bt): 10.76
Target price (Bt): 247.90 growth is guided to grow by mid-single digits. Capex spending is
budgeted at Bt20bn-25bn, versus Bt20bn in 2018. EBITDA margin is
Price Performance targeted to remain stable.
52 Wk high/low: 240 /165  During 9M9 core service revenue grew by 5.2% YoY to Bt105bn. Net
adds came in at +93.7k during 3Q19 (+208.2k for post-paid and-114.5k
1M 3M 1Y YTD
Absolute (%) 4.1 4.1 24.1 32.8
for prepaid). As at end September, ADVANC had a total of 41.56m
Relative (%) 6.3 8.2 28.3 30.3 mobile and 937k FBB service subscribers. FBB saw net adds of 81.6k.
Blended ARPU was stable at Bt263 for the mobile service and declined to
Bt549 for internet broadband in 3Q19. FBB revenue (of Bt1.48bn, or
150 4.2% of revenue) grew by 32% YoY.
 EBITDA improved by 18.6% YoY to Bt21.1bn for 3Q19 (or 15% YoY on a
normalized basis). EBITDA margin came in at 46.5% for the quarter,
125
compared with 42.8% in a previous quarter. SG&A increased by 5.7%
YoY but fell 6.2% QoQ, accounting for 15.8% of revenues.
100  Net D/E ratio stood at 136.8% at end September. Cash capex amounted
to Bt15.8bn. The 4G network was enhanced by more base stations with
92.3k of them at end 3Q19.
75
 Maintain BUY. We prefer to maintain our earnings estimates and BUY
call with a price target of Bt257. The upside risks include better-than-
50
expected operating cost control. However, the downside risks to our
earnings projections lie with high entry costs for future 5G services and
fiercer-than-expected market competition.
ADVANC SET
Investment Summary
FY 31 Dec 2016 2017 2018 2019F 2020F 2021F
Service (Btm) 122,561 128,583 133,429 140,457 145,079 149,214
Change (%) 1.6 4.9 3.8 5.3 3.3 2.9
Rating CGR 2019 Thai CAC
Net profit (Btm) 30,667 30,077 29,682 31,226 33,037 35,266
ADVANC Certified Change (%) -21.7 -1.9 -1.3 5.2 5.8 6.7
EPS (Bt) 10.31 10.12 9.98 10.50 11.11 11.86
Change (%) -21.7 -1.9 -1.3 5.2 5.8 6.7
P/E (x) 22.2 22.6 22.9 21.8 20.6 19.3
Analyst EV/EBITDA (x) 12.6 11.0 10.6 10.1 9.8 9.0
Rattana Leenutaphong DPS (Bt) 10.08 7.08 7.08 7.35 7.78 8.30
rattanal@ivglobal.co.th Yield (%) 4.4 3.1 3.1 3.2 3.4 3.6
Tel: 662-658-5787 BVPS (Bt) 14.32 16.93 19.35 22.68 26.23 30.05
P/BV (x) 16.0 13.5 11.8 10.1 8.7 7.6
ROE (%) 67.4 64.8 55.0 50.0 45.4 42.2
ROA (%) 13.4 10.7 10.3 11.0 11.8 12.1
Net D/E (%) 199.1 191.5 170.1 138.9 111.9 57.6
Source: Company and IVG estimates

The opinions and information contained herein are based upon sources believed to be reliable but their accuracy, completeness or correctness are not
guaranteed. This information is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered herein by this report. I V
Global Securities Plc (“IVG”) accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or its content.
 Company Update
Friday, November 01, 2019 I V Global Securities Public Company Limited

Results
(Btm) 3Q19 3Q18 % YoY 2Q19 % QoQ 9M19 9M18 % YoY
Service revenue 35,527 33,134 7.2 35,394 0.4 104,883 99,746 5.2
Sales 5,652 5,865 (3.6) 6,453 (12.4) 18,972 18,152 4.5
Total revenues 45,457 42,110 7.9 44,688 1.7 133,969 125,271 6.9
Regulatory costs 1,467 1,429 2.7 1,462 0.3 4,332 4,302 0.7
Dep & amortization 9,410 8,401 12.0 8,896 5.8 26,997 24,515 10.1
Network opex 7,416 7,223 2.7 7,320 1.3 22,107 19,564 13.0
Other service cost 2,455 2,781 (11.7) 2,492 (1.5) 7,299 7,936 (8.0)
Overall gross profit 18,821 16,087 17.0 17,809 5.7 53,478 50,231 6.5
SG&A expenses 7,226 6,835 5.7 7,706 (6.2) 21,718 19,472 11.5
EBIT 11,595 9,252 25.3 10,103 14.8 31,760 30,759 3.3
EBITDA 21,135 17,817 18.6 19,117 10.6 59,159 55,720 6.2
Interest expenses 1,195 1,277 (6.5) 1,194 0.1 3,605 3,859 (6.6)
Pre-tax profit 10,483 8,147 28.7 9,268 13.1 28,902 27,476 5.2
Tax 1,803 1,345 34.0 1,542 16.9 4,880 4,602 6.0
Net profit 8,679 6,801 27.6 7,726 12.3 24,020 22,844 5.2
EPS (Bt) 2.92 2.29 27.6 2.60 12.3 8.08 7.68 5.2
Source: Company and IVG estimates ; pre-TFRS 15

Financial ratios
(%) 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
Cellular revenue growth YoY 5.7 4.1 2.1 3.3 2.5 5.8 7.2
Cellular revenue growth QoQ 1.6 1.0 (1.0) 1.7 0.8 4.2 0.4
Total revenue growth YoY 5.3 8.1 9.2 8.2 7.1 5.8 7.9
Regulatory cost as % of rev 4.4 4.2 4.3 4.2 4.1 4.1 4.1
Gross margin - cellular (%) 50.0 47.1 45.3 44.7 46.4 47.2 47.9
Gross margin – cons (%) 42.1 40.1 38.2 36.3 38.4 39.9 41.4
SG&A as % of rev 15.5 14.7 16.1 15.6 15.4 17.1 15.8
EBIT margin 26.5 25.3 22.0 20.6 23.0 22.6 25.5
EBITDA margin 46.2 45.0 42.3 40.5 43.1 42.8 46.5
Net margin 19.6 19.0 16.2 15.3 17.4 17.3 19.1
Net D/E 187.6 168.3 203.2 170.1 142.5 130.8 136.8
Net add (m) (0.006) 0.045 0.552 0.522 0.322 (0.026) 0.094
Total sub (m) 40.05 40.09 40.65 41.17 41.49 41.46 41.56
Source: Company and IVG estimates; revenues are based on pre-TFRS 15

Quarterly performance
(Btm) 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
Service revenue 33,147 33,464 33,134 33,683 33,962 35,394 35,527
Sales 6,368 5,919 5,865 7,699 6,867 6,453 5,652
Total revenues 40,933 42,228 42,110 44,584 43,824 44,688 45,457
Regulatory costs 1,475 1,398 1,429 1,421 1,403 1,462 1,467
Dep & amortization 7,941 8,173 8,401 8,767 8,691 8,896 9,410
Network opex 5,462 6,879 7,223 7,365 7,371 7,320 7,416
Other service cost 2,403 2,752 2,781 2,830 2,352 2,492 2,455
Overall gross profit 17,215 16,929 16,087 16,169 16,848 17,809 18,821
SG&A expenses 6,384 6,253 6,835 7,000 6,786 7,706 7,226
EBIT 10,831 10,675 9,252 9,169 10,062 10,103 11,595
EBITDA 18,905 18,998 17,817 18,072 18,942 19,164 21,167
Interest expenses 1,292 1,290 1,277 1,288 1,217 1,194 1,195
Pre-tax profit 9,706 9,623 8,147 8,160 9,151 9,268 10,483
Tax 1,658 1,599 1,345 1,320 1,535 1,542 1,803
Net profit 8,037 8,005 6,801 6,839 7,615 7,726 8,679
EPS (Bt) 2.70 2.69 2.29 2.30 2.56 2.60 2.92
Source: Company and IVG estimates

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Company Update
Friday, November 01, 2019 I V Global Securities Public Company Limited

I V Global Investment Research – Recommendation Definitions

Sector Recommendations Stock Recommendations

OVERWEIGHT: The industry, as defined by the analyst's
coverage universe, is expected to outperform the relevant
primary market index by at least 10% over the next 12 months.
NEUTRAL: The industry, as defined by the analyst's coverage
universe, is expected to perform in line with the relevant primary
market index over the next 12 months.
UNDERWEIGHT: The industry, as defined by the analyst's
coverage universe, is expected to underperform the relevant
primary market index by 10% over the next 12 months.
BUY: Expecting positive total returns of 15% or more over the next 12
months.
HOLD: Expecting total returns of not more than -10% to +10% over the
next 3 months.
SELL: Expecting negative total returns of 15% or more over the next 12
months

Anti-corruption Progress Indicator Definitions

Level 5 Extended Extension of the anti-corruption policy to business partners in the supply chain, and disclosure of any
current investigations, prosecutions or closed cases
Level 4 Certified Audit engagement by audit committee or auditors approved by the office of SEC, and receiving
certification or assurance by independent external assurance providers (CAC etc.)
Level 3 Established Carrying out preventive measures, risk assessment, communication and training for all employees,
including consistent monitoring and review processes. (3A: Established by Declaration of Intent, 3B:
Established by Internal Commitment and Policy)
Level 2 Declared Public declaration statement to participate in Thailand's private sector Collective Action Coalition
Against Corruption (CAC) or equivalent initiatives
Level 1 Committed Organization’s statement or board's resolution to work against corruption and to be in compliance with
all relevant laws
Partially progress Insufficient or not clearly defined policy
No progress Data not available / no policy

Corporate Governance Report (CGR)

Excellent

Very good

Good

Disclaimers

The disclosure of the survey result of corporate governance, which is surveyed by the Thai Institute of Directors Association ("IOD"), and the
Anti-Corruption Progress Indicators, which is assessed by Thaipat Institute, are the disclosure of the survey or assessment result based on the
information received from the listed company that was stipulated in the form for Annual Corporate Governance Report of Thai Listed
Companies (CGR) and the form for the assessment of Anti-corruption that refers to the Annual Registration Statement (Form 56-1), Annual
Report (Form 56-2) or other relevant documents or reports of such listed company (as the case may be). The survey or assessment result is
based on the information of the listed company, which is disclosed to the public and can be accessed by all investors, and is made in order to
comply with the policy of the Office of the Stock Exchange of Thailand.
Nevertheless, the survey or assessment result is made from the perspective of the IOD or Thaipat Institute that are the third party only. It is
not an assessment of operation of the listed company and is not based on any inside information."
Since this survey or assessment result is only the survey or assessment result as of the date appearing in the survey or assessment result only,
it may be changed after that date or when there is any change to the relevant information. Nevertheless, I V Global Securities Plc. (IVG) does
not confirm, verify, or certify the accuracy and completeness of the survey or assessment result.

18th Floor, Mercury Tower, 540 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330
Telephone: +66 (0) 2658-5800 Fax: +66 (0) 2658-5779

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