Date: October 28, 2024
Broker: UOB Kay Hian

Company Overview

True Corporation (TRUE) was formed from the merger of True Corporation and Total Access Communication (DTAC), creating a major player in telecommunication services. The company, listed on the Thai Stock Exchange with the Bloomberg ticker TRUE TB, operates across broadband, digital, and mobile businesses.

Stock Data

• Share Price: Bt12.10
• Target Price: Bt14.50 (previously Bt13.00)
• Market Cap: Bt418,080.4 million (US$12,411.8 million)
• 52-Week High/Low: Bt12.20/Bt5.00
• Major Shareholders:
  • Telenor Thailand Investments (26.3%)
  • Thai NVDR (10.7%)
  • Charoen Pokphand Group (8.8%)

Q3 2024 Financial Performance

In Q3 2024, True Corporation reported a notable improvement in financial metrics, exceeding both its internal targets and consensus estimates:

• Revenue: Bt50,840 million (+1.8% year-on-year, +0.5% quarter-on-quarter)
• Gross Profit: Bt15,675 million (+14.1% year-on-year, +2.6% quarter-on-quarter)
• EBITDA: Bt27,020 million (+26% year-on-year, +11% quarter-on-quarter)
• Net Loss: Bt810 million, reflecting an improvement from the previous year and quarter
• Core Profit: Bt2,324 million, up 295% year-on-year and 19% quarter-on-quarter

Business Performance by Segment

1. Service Revenue
   Service revenue for Q3 increased by 5% year-on-year, driven primarily by the following sectors:

   • Fixed Broadband (FBB): Grew by 8%
   • Digital Business: Grew by 6%
   • Mobile Business: Increased by 4%
     Quarterly growth remained stable, reflecting the effectiveness of True’s service strategies.

2. Mobile Business
   The mobile segment saw steady progress due to an uplift in Average Revenue Per User (ARPU):

   • ARPU increased by 5% year-on-year and 2% quarter-on-quarter to Bt211.
   • Prepaid ARPU rose to Bt116 per subscriber per month (+12% year-on-year).
   • Postpaid ARPU showed slight growth year-on-year at Bt426 per subscriber per month.

3. Fixed Broadband (FBB) Business

   • FBB revenue grew by 8% year-on-year and 2% quarter-on-quarter to Bt6.4 billion.
   • ARPU reached Bt524 per month, marking a 10% year-on-year increase, driven by a strategic shift to higher-tier packages and the reduction of discounts.

Stock Outlook and Recommendations

UOB Kay Hian maintains a BUY recommendation on True Corporation with a revised target price of Bt14.50, reflecting a projected upside of +19.8%. The recommendation is based on True’s improving performance metrics and anticipated growth:

1. Expected Revenue Growth:
   Core revenue is projected to rise in Q4 2024 due to seasonal demand and further operational cost savings. The mobile and FBB segments are expected to see additional growth from increased ARPU.

2. Earnings Projections:
   True’s 2024 earnings estimate has been revised upward due to stronger-than-expected ARPU and an increase in gross margins. Positive earnings in the mobile and FBB businesses, coupled with potential cost reductions, are expected to drive growth into 2025.

3. Cost Optimization and Synergies:
   True has implemented cost-saving measures and synergy programs, focusing on operational efficiency to improve profit margins and reduce SG&A-to-sales ratios.

4. Long-Term Catalysts:

   • Increased ARPU through refined selling initiatives
   • Cost efficiencies and economies of scale
   • Prospective benefits from a spectrum auction in 2025 that may reduce costs

Environmental, Social, and Governance (ESG) Initiatives

True Corporation has integrated several ESG measures into its operational strategy:

1. Environmental Initiatives

   • Committed to carbon neutrality by 2030 for Scope 1 and Scope 2 emissions, and achieving net-zero by 2050.
   • No electronic waste is sent to landfills, aligning with its environmental sustainability goals.

2. Social Initiatives

   • Extensive connectivity projects across Thailand support digital access, from industrial applications to education.

3. Governance

   • Emphasis on transparency, accountability, and ethical conduct. True guides its employees to operate within strict adherence to disclosed corporate policies.

Valuation Metrics and Key Financial Ratios

• EV/EBITDA: Expected to improve with an estimated 8.3x for 2024.
• PE Ratio: Projected at 47.6x for 2024, improving to 23.9x by 2026.
• Debt Metrics: Although debt remains high, True’s interest coverage ratio is projected to improve from 2.7x in 2024 to 4.1x by 2026.

Risks and Earnings Adjustments

Potential risks include fluctuations in ARPU, competition in the telecom sector, and macroeconomic conditions. Earnings have been revised to incorporate higher-than-expected revenue from ARPU uplift and cost-saving impacts across Q1-Q3 2024.

This detailed summary captures True Corporation’s strategic and financial positioning as outlined by UOB Kay Hian on October 28, 2024.