Our BUY rating stands, premised on its service revenue and earnings rebound in 2H20 after the eased lockdowns, being the 5G leader from securing the most bandwidth in hand and its decent dividend yield.
Core profit aligned with our model but beat consensus
ADVANC posted a Bt7bn net profit for 2Q20 (post-TFRS16 or lease accounting). We compare YoY on the pre-TFRS16 basis. It posted a Bt7.24bn net profit 2Q20 (pre-TFRS16), down 7% YoY but up 3% QoQ. Excluding extra items in 2Q20—Bt350m in net FX gain and Bt312m tax benefit—core profit was Bt6.58bn, down 16% YoY and 8% QoQ. Net profit (pre-TFRS16) exceeded our model by 5% due to greater-than-modeled FX gain while core profit (pre-TFRS16) was in line with our model. This was against our previous estimates of Bt6.86bn net profit (pre-TFRS16)/Bt6.61bn net profit (post-TFRS16) and Bt6.5bn core profit (pre-TFRS16)/Bt6.25bn core profit (post-TFRS16). Service revenue (excl. IC) was 2% short of our model led by mobile revenue. Gross profit was 3% above our model. While core results were in line with ours, they beat the consensus 2Q20 core profit range of Bt5.8bn-Bt6.2bn. Note that the TFRS16 lowered its 2Q20 net profit by Bt234m.