The decision of JASIF’s unitholders in Sep 2022 will determine if ADVANC’s acquisition of TTTBB and JASIF will go through or not. Assuming ADVANC’s proposed amendments to JASIF’s lease agreements play out, our dividend yield forecast will drop by another 3-4% from the current projections for 2023-32. We think that the big drop in dividend yield is likely to be compensated for by ADVANC’s stronger credit profile, its secured and stable cash flow and the future opportunity to monetize and unlock values of ADVANC’s telecom assets into JASIF, which will present scope for an upside to JASIF’s earnings and valuation. With its rating reduced to TRADING BUY due to the increased operational risks, we believe that its current unit price is now undervalued.
Proposed amendments to JASIF’s lease agreements
During ADVANC’s analysts meeting on Jul 4, ADVANC’s management said clearly that it proposes to amend JASIF’s lease agreements including 1) the lease agreement termination for the entire 20% capacity and 2) another six-year extension of the main lease agreement (80% capacity) to Dec 31, 2037, with the lease rate of Bt402.37/core km for 2032. Note that the lease rate of Bt402.37/core km in 2032 will imply a 13% and 18% drop from the scenarios of a 0.5% and 1% inflation rates which will augment the lease rates to Bt464/core km and Bt488/core km. Moreover, it proposes that AWN, its wholly owned subsidiary, should become the sponsor of JASIF. The above conditions require at least 75% voting approval by JASIF’s unitholders (excluding the voting of JAS holding a 19% stake in JASIF). ADVANC said that if the above conditions are not approved by JASIF’s unitholders, ADVANC’s board may consider dropping the whole deal of acquiring TTTBB and JASIF.