The entry of ADVANC prompted us to cut our DCF target price, given the increased long-term risk of changes to the conditions of Main Lease Agreements after their expiry in Jan 2032. We downgraded its rating to a HOLD (the stretched valuation) for a high dividend yield in 2022-31.
ADVANC’s BOD approval of TTTBB and JASIF acquisition
On Nov 15, ADVANC’s BOD approved Advanced Wireless Network Co., Ltd (AWN’s), ADVANC’s wholly-owned subsidiary, acquisition of TTTBB and JASIF, although the conditions to terminate the Rental Assurance Agreement and the amendment of the Main Lease Agreement were not endorsed by JASIF’s Oct 18 unitholders meeting. As JASIF’s unitholders rejected amendment of the conditions of the rental agreement, ADVANC must honor the same conditions of the rental contract through the end of the contract in Jan 2032. However, the renewal of contract beyond the expiry date will require a material change to the existing terms and conditions to support the competitiveness of the business in comparison to other viable options to ensure appropriate operating costs over the long run. It will consider the telecom asset monetization with options to bring about more effective cost of capital. It expects the TTTBB share purchase and the acquisition of JASIF to be completed within 1Q23.