Thai Analysts Raise Bar for Thaicom’s Ipstar Service Potential in 2012

[Satellite News 02-17-12] Thaicom could be one of 2012’s satellite sector turnaround stories, according to several reports from regional investment bank analysts following the operator’s full-year results published earlier this week.

   In the three months to the end of December, Thaicom posted profits of 46 million Baht ($1.49 million), which represents the second quarter in a row that the operator reported a profit after many quarters of struggle.
   Bualuang Research Satellite Equity Analyst Prasit Sujiravorakul predicts that Thaicom’s upswing will continue throughout the year. “We believe that the core profit turnaround will continue through 2012, underpinned by Ipstar marketing progress in prime markets, especially China, and a telephone turnaround with the sale of Mfone expected in the first half of this year,” Sujiravorakul said in a research note.
   A majority of Thaicom’s success, according to Sujiravorakul, can be attributed to the turnaround in fortunes for its Ipstar service, which has long been the centerpiece of the operator’s growth strategy.
   IV Global Securities Equity Analyst Rattana Leenutaphong also hailed Ipstar’s performance. Thaicom’s overall service revenue for the year ended up 8 percent year-on-year, with year-over-year growth coming mainly from Ipstar at 59 percent.
   “The Ipstar service contributed 36 percent of total service revenue in 2011. Higher bandwidth usage came mainly from India, Japan, Australia, Malaysia, Thailand, Philippines, New Zealand, Myanmar and Indonesia, while the company removed a 50 percent discount on service charges from its Japanese customer from April 2011,” said Leenutaphong.
   Ipstar capacity utilization is estimated at about 25 percent. Thaicom said the unit’s 8 percent increase in conventional satellite service revenue was due to rising demand from the broadcasting sector and value-added services such as teleport, tape playout and digital compression.
   Leenutaphong is positive about the company’s prospects going forward. “We maintain our 2012 earnings estimate as we expect a continued improvement in Ipstar operations with increased efforts to boost Ipstar demand in China, India and Indonesia,” said Leenutaphong. “Meanwhile, the company will also pre-launch sales of Thaicom 6, which is expected to be launched into orbit by July 2013. While we maintain our earnings estimate, we have boosted our target price from Baht 12 ($0.38) to Baht 15.6 ($0.51) to include the Thaicom 6 potential in our valuations.”           
   Capital Nomura Securities Analyst Piyachat Ratanasuvan expects revenue from Ipstar’s services to surge by 51 percent in 2012 to Baht 3.9 billion ($126.22 million).            
   “The drivers for the revenue from Ipstar’s services in 2012 should include the expansion of the revenue contribution from several countries. First, new customers in China, Japan, the Philippines and Indonesia should start to make a contribution to the revenue from Ipstar’s services from full year 2012 onwards,” Ratanasuvan said. “Second, Ipstar’s existing customers in Australia and Malaysia that have not made a full-year’s revenue contribution in 2011 should start to do so from 2012 onwards. Finally, the revenue from Ipstar’s existing customers in Japan and India are expected to step-up as they have agreed to do in their contracts.”
   Ratanasuvan also sees Ipstar progress in China this year and believes that Thaicom should be able to sign contracts to provide services in China where its satellite fleet has the largest capacity. “We expect Thaicom to start to realize a revenue contribution from China from the fourth quarter this year onwards. Currently, the company is discussing the possible usage of this satellite with its customers in China, including government entities for ‘Schoolnet’ services and mobile phone operators for mobile trunking services,” said Ratanasuvan.
   In June, the operator awarded its Thaicom 6 contract to Orbital Sciences. Thaicom 6 aims to offer hybrid Ku- and C-band services to the South and Southeast Asia and Southern Africa regions from the 78.5 degrees East orbital slot. In December, Thaicom signed a cooperation agreement with AsiaSat to provide satellite services from the orbital location at 120 degrees East. Under the agreement, the two companies will place an interim satellite at the 120 degrees East orbital slot, while a new satellite contracted with Space Systems/Loral will be launched in early 2014. AsiaSat and Thaicom will provide services on their portions of the new satellite under the name AsiaSat 6 and Thaicom 7, respectively.
   The operator also appointed Supajee Suthampan as its new CEO late last year. Ratanasuvan believes this is a significant appointment. “This is the first time that Thaicom’s CEO has not come from the Shin Corp. group. This implies that Thaicom will be allowed to implement its new business strategy.”

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