KGI Recommends COM7 with a Target Price at ฿26 after Reporting 47% Growth in Profit

KGI Securities has made an analysis on Com7 Public Company Limited (COM7) after a report of 46.4% growth in profit, expecting COM7’s future plans to translate into long-term earnings visibility. The latest price implies an undemanding 2019F PER of 20.8x, -1.0SD below its long-term historical average and a moderate dividend yield of 2.9%. Thus, KGI reiterates an outperform rate on COM7 with an unchanged target price of ฿26.00/share.

 

COM7 reported SG&A expense of THB 699 million for the quarter, implying a SG&A-to-revenue ratio of 8.6%, down from 9.5% in both 4Q17 and 3Q18, which KGI believes that this might be from economies of scales, and larger than KGI expected. This should more than offset slower growth in revenue, which rose 13.0% YoY in 4Q18, down from growth of 20.7% YoY in 3Q18. The slower growth might be from mobile revenue, which could be adversely affected by lower sales of iPhones in Asia.

The acquisition of Kingkong Phone helped COM7 to exceed its target expansion plan by 11 branches. In 2018, COM7 had a total network of 640 branches, compared to 434 branches in 2017. Of all 640 branches were comprised of 206 Banana shops, 100 Studio 7 shops, 98 Kingkong Phone shops, 91 managed shops. It is noted that the total network in 2018 exceeded COM7’s original target of 629 branches.

More importantly, the attractiveness of COM& can be found in a dividend of ฿0.5/share for its 2018 performance, offering a moderate yield of 2.9% which reflects a payout ratio of 68%.

 

However, a slower-than-expected expansion plan and lower-than-expected demand for smartphones could be a risk to COM7’s price.

 

Meanwhile, other security companies also give positive ratings on COM7 as well.

KTB Securities (Thailand): Buy at ฿26.00/share

Phillips Securities: Buy at ฿22.60/share

Tisco Securities: Buy at ฿24.00/share