Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

Total Access Communication / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/total-access-communication" target="_blank" data-smartkarma-citation="entities:948:1" rel="noopener">Total Access Communication (DTAC TB)</a> and <a href="https://www.smartkarma.com/entities/true-corp-pcl" target="_blank" data-smartkarma-citation="entities:8:1" rel="noopener">True Corp Pcl (TRUE TB)</a> are exploring a merger of equals at a swap ratio of 1:10.221. NBTC approval could be the biggest hurdle.</li>
<li>Both stocks are trading lower than their Voluntary Tender Offer prices. The spread is between 5.5-6.5% and that could close over the next couple of months.</li>
<li>We prefer a long <a href="https://www.smartkarma.com/entities/total-access-communication" target="_blank" data-smartkarma-citation="entities:948:1" rel="noopener">Total Access Communication (DTAC TB)</a> / short <a href="https://www.smartkarma.com/entities/true-corp-pcl" target="_blank" data-smartkarma-citation="entities:8:1" rel="noopener">True Corp Pcl (TRUE TB)</a> trade as the downside is protected in case of a deal break.</li>
</ul>



Total Access Communication (DTAC TB) and True Corp Pcl (TRUE TB) are exploring a merger of equals at a swap ratio of 1:10.221. NBTC approval could be the biggest hurdle.
Both stocks are trading lower than their Voluntary Tender Offer prices. The spread is between 5.5-6.5% and that could close over the next couple of months.
We prefer a long Total Access Communication (DTAC TB) / short True Corp Pcl (TRUE TB) trade as the downside is protected in case of a deal break.


DTAC/TRUE Merger: Details and Index Implications

Thai Equity - Bottom-up - Equities, Pi Securities PCL, Thailand

Pi Research

Thai Equity - Bottom-up - Equities

Leading, full-service investment firm in Thailand

Pi Securities PCL, Thailand

Pi Securities is a well known securities company with 40 years experience in the industry, serving more than 60,000 clients. We offer one - stop service providing full range of financial products and services including extensive Brokerage, Proprietary Trading (Equities and Bonds), Advisory Services, Structured Products.

Moreover, our new research team tailored for institutional clients to focus on mid to small cap of Thai equities and trading strategies. Our services offered to our premium clients also include arrangement of company or site visits to with the managements of Thai listed companies.

Note: Effective on 1 March 2022, Country Group Securities PCL changed its name to Pi Securities

Equity Bottom-Up

Total Access Communication / Equity Bottom-Up

<ul>
<li>DTAC and TRUE notified the SET of a potential merger and will create a non-binding memorandum of understanding. The deal will involve a share-swap model, where DTAC shareholders can either </li>
<li>We believe accepting the tender offer is the best course of action for short-term oriented shareholders, due to the time-consuming nature of the deal and the potential lingering cost structure </li>
<li>Deal of merger must still undergo approval from board of directors and shareholders of both companies and key regulatory agencies.</li>
</ul>


DTAC and TRUE notified the SET of a potential merger and will create a non-binding memorandum of understanding. The deal will involve a share-swap model, where DTAC shareholders can either 
We believe accepting the tender offer is the best course of action for short-term oriented shareholders, due to the time-consuming nature of the deal and the potential lingering cost structure 
Deal of merger must still undergo approval from board of directors and shareholders of both companies and key regulatory agencies.


DTAC: Merger with TRUE Will Expand Its Value

<p><strong>We expect DTAC to report 3Q21 recurring net profits of Bt1.4bn (-1.3%YoY, +3.6%QoQ), with the QoQ rise arising from decreased marketing costs.</strong></p><p>• Expect flat QoQ 3Q21 revenue at Bt20bn, (+5.0%YoY, +0.1%QoQ), due to stunted mobile subscriber base growth (+3.8%YoY,+0.8%QoQ) from weaker consumer spending</p><p>• Expect 4Q21 to report lowest net profit, which has consistently been the case for the past 3 years from seasonal increase in handset device sales, which have historically been loss-making (3yr handset-device gross margin: -125%)</p><div>• Expect the recent price surge to eventually drop back to pre-rumor prices at around Bt32.00 until telecom companies announce their involvement in the 3500 MHz spectrum auctions</div><div>
<br>
</div><p><strong>We maintain SELL rating and target price of Bt32.70, derived from DCF, implying 18.2xPE’22E, which 24% below the Thai telecoms sector 23.9xPE’22E. DTAC’s large discount is justified considering the company has been losing market share over the past few years, owns a smaller spectrum portfolio relative to its competitors, and has an uncertain outlook in the 5G era.</strong></p>

We expect DTAC to report 3Q21 recurring net profits of Bt1.4bn (-1.3%YoY, +3.6%QoQ), with the QoQ rise arising from decreased marketing costs.• Expect flat QoQ 3Q21 revenue at Bt20bn, (+5.0%YoY, +0.1%QoQ), due to stunted mobile subscriber base growth (+3.8%YoY,+0.8%QoQ) from weaker consumer spending• Expect 4Q21 to report lowest net profit, which has consistently been the case for the past 3 years from seasonal increase in handset device sales, which have historically been loss-making (3yr handset-device gross margin: -125%)• Expect the recent price surge to eventually drop back to pre-rumor prices at around Bt32.00 until telecom companies announce their involvement in the 3500 MHz spectrum auctions
 
We maintain SELL rating and target price of Bt32.70, derived from DCF, implying 18.2xPE’22E, which 24% below the Thai telecoms sector 23.9xPE’22E. DTAC’s large discount is justified considering the company has been losing market share over the past few years, owns a smaller spectrum portfolio relative to its competitors, and has an uncertain outlook in the 5G era.

DTAC: Expect 3Q21 Earnings to Rise Slightly QoQ

<p><strong>We initiate coverage of DTAC with a SELL rating, based on a target price of Bt32.70, derived from a DCF valuation (WACC of 7.9%, terminal growth of 2%). Our valuation implies a 16.8xPE’22E, which is 29% discount from Thailand Telecom sector at 23.5x.</strong></p><p><strong>The story:</strong></p><p>• Declining competitive position and profitability</p><div>• Failing to keep pace with 5G momentum</div><div></div><div>• Declining trend in the next 3-years earnings</div><div></div><div>• Low valuations justified</div><p></p><p><strong>Risks:</strong></p><p>• Intense competition in a saturated telecommunications industry</p><div>• New mega competitor after TOT and CAT merger</div><div></div><div>• Changes in NBTC’s board and regulatory policies</div>

We initiate coverage of DTAC with a SELL rating, based on a target price of Bt32.70, derived from a DCF valuation (WACC of 7.9%, terminal growth of 2%). Our valuation implies a 16.8xPE’22E, which is 29% discount from Thailand Telecom sector at 23.5x.The story:• Declining competitive position and profitability• Failing to keep pace with 5G momentum• Declining trend in the next 3-years earnings• Low valuations justifiedRisks:• Intense competition in a saturated telecommunications industry• New mega competitor after TOT and CAT merger• Changes in NBTC’s board and regulatory policies

CEO, A. Stotz Investment Research

Dr. Andrew Stotz, CFA

Quantamental Investing to beat Benchmarks

A. Stotz Investment Research

We pick stocks. We construct portfolios. All our effort is focused on how to better pick stocks and construct portfolios. We serve fund management companies, family offices, and high net worth individuals.

<p><strong>We maintain our SELL recommendation on CHAYO but raise our target price to Bt13.70 (previously Bt8.70), implying a downside of 20% from the current price. We derive our target price from a 30% premium to the 2022E PB of Thai Diversified Financials, giving a 2022E 4x target PB.</strong></p>
<p><strong>Investment thesis:</strong></p>
<ul>
<li>Rising level of bad loans in Thailand can boost core business</li>
<li>Economic uncertainty helps to expand the customer base for debt collection</li>
<li>Capital injection for new subsidiary helps to boost business</li>
<li>Debt collection to further benefit from increasing mobile usage</li>
<li>Joining the hemp hype supposed to bring additional income</li>
</ul>
<p><strong>Interim:</strong> The 1Q21 results were strong, and we revise our loan growth and loan yield slightly upward. However, we still think that the stock trades too expensive.</p>
<p><strong>Risks:</strong> Increased competition in acquiring non-performing loans, loss from unsecured debt management, adverse regulatory changes, and potential litigation issues arising from debt collection service.</p>

We maintain our SELL recommendation on CHAYO but raise our target price to Bt13.70 (previously Bt8.70), implying a downside of 20% from the current price. We derive our target price from a 30% premium to the 2022E PB of Thai Diversified Financials, giving a 2022E 4x target PB.
Investment thesis:

Rising level of bad loans in Thailand can boost core business
Economic uncertainty helps to expand the customer base for debt collection
Capital injection for new subsidiary helps to boost business
Debt collection to further benefit from increasing mobile usage
Joining the hemp hype supposed to bring additional income

Interim: The 1Q21 results were strong, and we revise our loan growth and loan yield slightly upward. However, we still think that the stock trades too expensive.
Risks: Increased competition in acquiring non-performing loans, loss from unsecured debt management, adverse regulatory changes, and potential litigation issues arising from debt collection service.

CHAYO: No Cheap Opportunity to Participate in High Growth

Thailand

Total Access Communication Public Company Limited provides cellular mobile telephone services under WorldPhone 800 and WorldPhone 1800 brand names throughout Thailand. The Company also sells cellular handsets and other telecommunications equipment through its WorldMedia network of retail stores.

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Total Access Communication (DTAC TB)

DTAC/TRUE Merger: Details and Index Implications

DTAC and TRUE are exploring a merger of equals. The biggest hurdle could be regulatory approval since the merged entity would have a market share >...

Brian Freitas

DTAC: Merger with TRUE Will Expand Its Value

DTAC and TRUE notified the SET of a potential merger and will create a non-binding memorandum of understanding. The deal will involve a share-swap...

Pi Securities PCL, Thailand

DTAC: Expect 3Q21 Earnings to Rise Slightly QoQ

e expect DTAC to report 3Q21 recurring net profits of Bt1.4bn (-1.3%YoY, +3.6%QoQ), with the QoQ rise arising from decreased marketing costs

Pi Securities PCL, Thailand

DTAC: No Growth with Uncertain Prospects

We initiate coverage of DTAC with a SELL rating, based on a target price of Bt32.70, derived from a DCF valuation (WACC of 7.9%, terminal growth of...

Pi Securities PCL, Thailand

CHAYO: No Cheap Opportunity to Participate in High Growth

We maintain our SELL recommendation on CHAYO but raise our target price to Bt13.70 (previously Bt8.70), implying a downside of 20% from the current...

A. Stotz Investment Research

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