KS

As of 15.50 local time in Thailand, the share price of Jasmine International Public Company Limited (JAS) was at ฿6.35/share or ฿1.25 or 16.45%. During the session, the highest JAS’s share price was ฿7.80/share and lowest was ฿5.90/share with a trading value of ฿3,768 million. A sharp decrease of JAS’s share price might due to the issue of selling JAS’s share to both domestics and overseas companies. Recently, on 23 July 19, Kasikorn Securities stated that the trading share price of JAS should not over than 11x of EBITDA in 2020E or ฿6.66/share. From the research of “Kaohoon”, the consensus of JAS’s share price is ฿5.60/share which is lower than expected at ฿7.60 or 13.15%. As a result, the share price of Jas has been decreased sharply in today. A financial statement in the 1Q2019 of JAS reported a total value of JAS’s asset was THB 52,741.63 million, the total debt was THB 33,586.58 million, and an accumulated profit was THB 4,956.38 million. Additionally, the book value of JAS’s share was THB 2.22/share. Kasikorn Securities has stated that meanwhile, JAS’s major shareholder may be looking the way to exit from the fixed broadband business and Advanced Info Service Public Company Limited (ADVANC) may be interested to step up from the fourth-largest fixed broadband player with only 0.8m subscribers to be the second-largest player with 3.8m subscribers which a takeover deal is unlikely to happen from three key reasons. 1) ADVANC should strike the takeover bid way prior to JAS’s second round of the asset sale and leaseback with JASIF in order to avoid possible complications and to accelerate EBITDA by terminating the rental contract with JASIF when it will end in Feb 2026. 2) it is too difficult for ADVANC to quantify possible losses from JAS’s litigations with other parties. 3) JAS’s most of the last mile network is still copper cable, which may require additional investment to convert them into the optical fiber cable. Furthermore, both share prices have rallied in past weeks, which appear unconventional as if the takeover deal is coming true, ADVANC’s share price is likely to fall whereas the acquired JAS’s share price is likely to rally. However, if ADVANC will execute it, Kasikorn expected that the takeover price should not go beyond 11x of JAS’s 2020E EBITDA or ฿6.66 per share, which will result in ADVANC’s value creation of ฿1.82 per share or 1% of Kasikorn’s 2020E target price of ฿221.8/share. The above analysis is based on a few key assumptions which are: 1) the takeover will happen after the second round of JAS’s asset sale and leaseback deal with JASIF. 2) The synergy value simply comes from the EBITDA margin expansion from JAS’s 2020E EBITDA margin level of 26.9% to ADVANC’s 2020E EBITDA margin of 45.4%. 3) The analyst assumes the synergy value will stay for 10 years. Recommendation: Between the two, the analyst prefers ADVANC due to Outperform and set the target price at ฿221.8/share. For JAS, the analyst views as Underperform and set the target price of ฿6.7/share due to firstly there is a little chance for the takeover deal to take place, secondly, JAS’s share price surged 70% YTD, which should largely price in possible upside from JAS’s second round of the asset sale and leaseback with JASIF, vs. 25% of ADVANC, thirdly, mobile competitive intensity is easing whereas fixed broadband competition remains fierce and lastly, the analyst sees rooms for valuation upgrade at ADVANC from better revenue growth, OPEX saving from 2G shutdown and lower than expected 5G spectrum and network CAPEX. Previously, on 22 July 2019, “Kaohoon” has reported currently, JAS has been reportedly in talks with foreign telecommunication companies who are interested in purchasing JAS’s shares and a joint venture, especially a Korean telco behemoth, Korea Telecommunications (KT), said a source close to the matter. Aside from international firms, there are also two reportedly interested Thai firms namely; Total Access Communication Public Company Limited (DTAC) and Advanced Info Service Public Company Limited (ADVANC) to have set their eyes on JAS as well. However, JAS has yet to decide whether to cooperate in a joint venture with any firms, but expected to be concluded in 2019.