Equity Analysis /

Thailand (Bualuang): System Integrator - Digital transformation enablers

  • Enablers of digital transformation

  • Thailand 4.0 drives long-term growth in System Integrator space

  • ITEL to lead earnings growth

Napon Jaisan
Napon Jaisan

Equity Research Analyst

Bualuang Securities
1 April 2022

Now that software stocks trade at sky-high PERs in the 60-100x range, attention should shift to System Integrator space, where PERs range only 10-30x. We expect the firms working in this space to see strong income and profit growth tied to Thailand’s ongoing digital transformation. Our System Integrator coverage opens with a BUY call on ITEL (YE22 target price of Bt7.60) and TRADING BUY ratings on AIT (Bt9.20) and MFEC (Bt11.50).

Enablers of digital transformation

In the IT industry, system integrators bring together component sub-systems into a whole, ensuring that those subsystems work together, enabling digital transformation. They are essential to the functionality of cloud computing, big data, networking, security, AI, cryptocurrency—for any application in which one set of software has to interface efficiently with other software in order to work. The National Broadcasting and Telecommunications Commission (NBTC) reported 17.4% growth in the data communication services market in 2020 and estimated 15% growth for 2021. The advent of COVID-19 accelerated digital transformation by prompting many companies to adopt work-from-home policies, which required a lot more cloud server and data center capacity.