Thailand

Brief Thailand: Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround? and more

In this briefing:

  1. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?
  2. MAJOR: Impressive 4Q18 Earnings
  3. Delta Thailand’s Tender Offer: Updated Timetable

1. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?

Plans regarding Samsung and Huawei’s foldable smartphones are out. The companies, which happen to be two of the largest contenders in the smartphone landscape are expected to unveil their foldable smartphone prototypes this month. In 4Q2018, Samsung, coming in first place, held a market share of 18.7% while Huawei, in third place, held a market share of 16.1%. Both companies are following different strategies when it comes to their foldable phone models.

The concept of foldable phones revolves around devices that can be folded into the size of a smartphone or opened up in to the size of a tablet. Huawei is said to be planning to introduce their foldable smartphone with 5G compatibility while Samsung is planning to release their foldable model with 4G compatibility. The market leader aims to leverage the expertise it has gained on its display technologies in its foldable smartphones.

2. MAJOR: Impressive 4Q18 Earnings

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MAJOR 4Q18 net profit was Bt259m (+247%YoY, +26%QoQ). The impressive earnings was driven by solid guests admission (+97%YoY).

  • 4Q18 revenue was Bt3.0bn (+59%YoY, +44% QoQ). Interesting movies lineup was the factor, pushing admission revenue (+88%YoY) and concession revenue (+70%YoY).
  • Gross profit margin was strong at 37.6% from 28.7% in 4Q17 and 30.8% in 3Q18, thank to the higher contribution of concession revenue, which has decent margin.
  • SG&A to sales was under control at 27.0%, compared to 34.3% in 4Q17 and 26.7% in 3Q18.

We maintain a BUY rating on MAJOR with 2019E target price of Bt31.00, derived from a PER of 24.2x, which is +1 SD of its 3-year trading average. We expect MAJOR to continuously deliver robust earnings in 2019E, given the fascinating movies lineup and advertising sales model changing from direct selling to selling through agencies.

3. Delta Thailand’s Tender Offer: Updated Timetable

With Form 247-3 (Intention to Make a Tender Offer) and the FY18 dividend  (Bt2.30/share) for Delta Electronics Thai (DELTA TB) having been announced, this insight briefly provides an updated indicative timetable for investors.

The next key date is the submission of Form 247-4, the Tender Offer for Securities, which will provide full details of the Offer.

Date

Data in the Date

Comment

1-Aug-18
Announcement
13-Jan-19
Pre-approvals fulfilled
18-Feb-19
Form 247-3 submitted
18-Feb-19
FY18 dividend announced
22-Feb-19
Form 247-4 to be submitted
As per announcement
25-Feb-19
Tender Offer open
Assume 1 business day after 247-4 is submitted
28-Feb-19
Last day to buy to be on the 4 Mar register
T+2 settlement
1-Mar-19
Ex-date for dividend
As announced
4-Mar-19
Date to be on the registry to receive full-year dividend
As announced
22-Mar-19
Last day for revocation of shares
20th day of Tender Offer1
29-Mar-19
Close of Offer
Assuming 25 business days tender period
2-Apr-19
AGM
As announced
3-Apr-19
Consideration paid under the Offer
Assume 3 business days after close of Offer
11-Apr-19
Payment of FY18 dividend
As announced2
Source: Delta, my estimates 
1 assuming the shareholder has not forfeited the right to revoke
2 the dividend is subject to a 10% WHT for non-residents.

This above indicative timetable assumes a conditional offer based on a minimum acceptance level of at least 50%. Payment under the offer may indeed be earlier, as explained below, which also ties in with a shareholders’ right to revoke shares tendered. 

In addition, investors should not tender once the offer opens – assuming the tender period commences on the 25 February – but wait until their shares are on the registry as at 4 March to receive the FY18 dividend.

Currently trading at a 2.2%/22% gross/annualised spread. Bear in mind the dividend is subject to 10% tax.

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