TRUE: When Costs Overwhelms Profits

True Corporation Public Company Limited (TRUE) faced another loss after booking a net loss of its earnings report in the first quarter of 2020. Still, the loss was inline with analysts’ forecast.

 

Problems with higher cost and higher depreciation and amortization (D&A) have been hindering TRUE’s profit for over twenty years, including the first quarter of 2020 as well.

The company is well-known as a company with overwhelmingly high debt. Its debt to equity ratio is over 3 times and its continuity of investment to maintain the compatibility in the market made the company even worse.

 

TRUE reported a net loss of 161 million baht in the first quarter of 2020, contrasted to its net profit of 1,508 million baht in the same period of last year.

In fact, TRUE’s total revenue increased 5.7% to 34,844 million baht, mainly due to an increase of 3% to 26,600 million baht from service revenue as customers from Truemove H, TrueOnline increased. Meanwhile revenue from TrueVisions decreased by 2,600 million baht due to lower revenue from advertisement, sponsors and other income.

Moreover, TRUE’s EBITDA recorded at 12,219 million baht in 1Q20, increased from 7,584 million baht in 1Q19, while profit from operations increased by 52.1% to 2,326 million baht.

 

However, TRUE’s D&A increased significantly from 6,055 million baht in 1Q19 to 9,894 million baht in 1Q20, while interest expense increased almost a fold from 1,634 million baht in 1Q19 to 3,839 million baht in 1Q20.

Thus, TRUE’s bottom line has no other choice but to record a net loss due to its high cost.

 

Nevertheless, TRUE’s share price made a three-day rally since its earnings report on May 18, 2020, rising from ฿3.18/share to ฿3.72/share on May 21, 2020, before starting to ease on May 22 with a fall of 0.54%.

 

Maybe the share price had hit its bottom, and now is the time for a technical rebound.