KGI Securities (KGI) has made an analysis on Intouch Holdings Public Company Limited (INTUCH), maintaining a rating of “Outperform” with a target price at ฿76.00/share.
Yesterday, (April 7), Temasek Holdings PTE (Temasek) decided to dispose of 135.2mn shares or 4.22% of INTUCH’s total shares at a price range of ฿45.12 – ฿46.30. According to the news, KGI sees as it would has negative sentiment to INTUCH’s share price, KGI believes there would be no impact to the company’s fundamentals. Thus, KGI maintains the 2020 – 2021 earnings forecasts for INTUCH at ฿12.07bn and ฿12.06bn, respectively and target price maintains at ฿76.00 (SOTP based on Advanced Info Service (ADVANC.BK/ADVANC TB)* and Thaicom (THCOM.BK/THCOM TB)’s target prices of ฿257 and ฿4.20, respectively, coupled with 22% discount). KGI reiterate a rating of Outperform due to anticipated solid earnings in 2020, high dividend yield of 5.8%, and attractive valuation with deep discount from NAV.
Negative sentiment to INTUCH’s share price
KGI expects this news would have negative sentiment to INTUCH’s share price as i) Temasek has held a stake in INTUCH for more than ten years through Hong Kong and Shanghai Banking Corporation Limited (HSBC), and ii) the price range is around 4.5% – 7.0% discount from the closing price on April 3 of ฿48.50. However, KGI believes that the deal is so Temasek can rebalance its investment portfolio during the current crisis (COVID-19 outbreak). Temasek’s will still be a major shareholder holding a 5.2% stake in INTUCH after the completion of this deal compared to 9.42% previously.
No impact from this deal to INTUCH’s fundamental
KGI expects Temasek’s disposal of shares would have no impact on INTUCH’s fundamental since i) Singtel Global Investment PTE (one of Temasek’s investment arms) is still a major shareholder in INTUCH with a 21.0% stake, and ii) most of INTUCH’s profit is from its domestic mobile business, Advanced Info Service (ADVANC.BK/ADVANC TB)* which Singtel Strategic Investment, another entity of Temasek’s arm, holds a 23.32% stake. Thus, KGI maintained forecast for INTUCH’s 2020 – 2021 earnings at ฿12.07bn (+9% YoY) and ฿12.06bn (flat YoY), respectively.
More attractive from deep discount
KGI sees INTUCH’s share price always trades at a discount from its NAV calculated by total NAV of ADVANC, satellite business (Thaicom (THCOM.BK/THCOM TB)) and other businesses (non-listed companies). INTUCH’s current share price (April 7) is trading at a 36% discount to its NAV (based on market prices of ADVANC and THCOM at ฿196 and ฿2.50). Note that the average discount between INTUCH’s market price and its NAV in the past three years was 22% while the maximum discount was 30%.
Lower than expected share of profit from ADVANC.