We believe that DTAC’s YoY shallower drop in service revenue and its QoQ rise in 1Q21 implies that its service revenue recovery in 2021 remains on track, which will be the key catalyst to its earnings improvement. Although DTAC is our least preferred pick in the ICT space due to having lowest amount of bandwidth in hand, we rate it a TRADING BUY due to its enhanced revenue and earnings recovery in 2H21 and its cheap valuation against peers and its long-term mean—EV/EBITDA of 5x against its mean of 5.7x.
Service revenue recovery in Feb; enhanced recovery in 2H21
The overall subscriber additions trend in 1Q21 is likely to deliver a net positive number, which will carry the stronger momentum from 4Q20. We assume net additions of a positive 200k in 1Q21, up 16% QoQ, bolstered by QoQ higher postpaid and prepaid net additions and see a positive sign of prepaid average revenue per user (ARPU) rising 1.6% QoQ to Bt130/sub/mth in 1Q21 (against its 0.8% QoQ drop in 4Q20). This has to do with two macro factors—1) the full phase of city reopening in mid-Feb after the lockdown of some provinces in Jan due to Thailand’s second wave of COVID-19 and 2) the government’s spending subsidy scheme spurring overall consumer spending.