ADVANC Falls 2% as Credit Suisse Downgrades Its Rating with a Big Target Price Cut

The share price of Advanced Info Service Public Company Limited (ADVANC) dropped ฿4.50/share or 2.49% to ฿176.00/share as of 12:02 local time in Thailand, with a trading value of 1,886 million baht after Credit Suisse downgrade its rating on ADVANC to NEUTRAL.

Credit Suisse on today (August 3) published research for ADVANC, making a big target price cut to 187 baht from 243 baht through an increased beta and downgrading ADVANC to NEUTRAL. As the industry enters a new cycle of 5G investment, it will likely see higher cost pressure and offer limited growth in the near to medium term.

On a relative basis, as Thailand’s largest and well-run mobile-phone operator, ADVANC will be a choice for investors who would still like to get an exposure to the sector. Among peers, ADVANC has an advantage over 5G investment from its largest mobile subscriber base, a strong brand and extensive network coverage.

Despite the potential for value creation, monetisation of ADVANC’s 5G investment will be slow. GULF is emerging as a strategic shareholder and may seek to exploit ADVANC’s communications network to advance its business objectives.

An upside looks limited. Its EV/EBITDA relative to A&J telco is slightly below the historical average. That said, Credit Suisse sees a little room for valuation re-rating at 2022E EV/EBITDA of 7x and P/E of 18x, with a little EBITDA and bottom line growth in the low-to mid-single digits in 2021-23E.