Equity Analysis /
Thailand

True Corp PCL: Resurfaced rumor of TRUE merging with DTAC excites market

  • Strong sign of service revenue recovery in 4Q21

  • Enterprise revenue—key growth driver in the next few years

  • Rumor of TRUE merging with DTAC resurrects in the market

Prasit Sujiravorakul
Prasit Sujiravorakul

Equity Research Analyst

Bualuang Securities
17 November 2021

TRUE’s recent share price rally is based purely on speculation over its business merger with DTAC through a share swap transaction which may be announced soon. If one ignores this rumor and only considered its fundamentals, its business should resume a growth mode after the reopening in Nov and its core loss is expected to be reduced in 4Q21-2022 via the improved service revenue and the continued cost optimization. Our TRADING BUY stands, led by its shallower core loss in 4Q21 through 2022 and its valuation—EV/EBITDA of 8.5x against its long-mean of 8.7x.

Strong sign of service revenue recovery in 4Q21

Management saw the positive trend of consumption recovery from the eased lockdowns in Sep and the reopening impact in Nov and its impact on prepaid revenue recovery as people returned from upcountry to the cities and used more of True Move-H’s services upon the country’s reopening. Moreover, there is also a positive sign of the prepaid price point uplift in certain areas, boosting prepaid ARPU. For the postpaid segment, its pricing is in line with the industry with an aim to migrate prepaid to postpaid and postpaid to 5G customers with added contents and product/service bundling within True Group. For 5G, it targets 2m subscribers by YE21 and more than 4m by YE22 (up from 1.5m at end-3Q21). We believe that the 5G adoption rate is likely to accelerate in 2022, led by the launch of affordable 5G handsets of below Bt6,000 in 2Q22. There is still a positive sign for 5G ARPU uplift of 10-15% although there are only premium to mid-tier 5G handsets available in the market. We think that the huge core loss in 3Q21 was the nadir before its recovery in 4Q21 and throughout 2022.