Maybank Thailand Upgrades ‘TRUE’ to BUY, but Still Prefer DTAC for Higher Upside

The share price of TRUE and DTAC made a slight rebound on Wednesday after a sharp plunge yesterday after the announcement indicating a cancellation of the amalgamation.

As of 10:08 BKK time, True Corporation Public Company Limited (SET: TRUE) rose 0.87% to THB4.64 per share, while Total Access Communication Public Company Limited (SET: DTAC) gained 1.86% to trade at THB41.00 per share. The share price of TRUE and DTAC plunged 7.63% and 8.03%, respectively, at the closing yesterday.


TRUE and DTAC announced a cancellation of the amalgamation between both companies yesterday due to an expired condition of voluntary tender offer.
Citrine Global Company Limited and Citrine Venture SG Pte. Ltd., which are joint venture companies between Charoen Pokphand (CP) Holding, the parent firm of TRUE, and Telenor Asia, the parent firm of DTAC, have submitted the statement declining to make the conditional voluntary tender offer for all shares in TRUE and DTAC due to certain conditions precedent to both companies not having been satisfied within one year from 20 November 2022, during which time the Tender Offerors have expressed their intention to launch the voluntary tender offer. However, TRUE and DTAC stated that they will continue to work together in relation to the Amalgamation.

Maybank Securities (Thailand) (MST) stated that TRUE and DTAC still aim to complete the amalgamation process within 1Q23 (when the New Co will be listed on the SET), which is in line with its forecast. Meanwhile, Telenor believes in the benefits of the merger and still targets an equal partnership of c.30% of the New Co. MST maintained its forecasts of cost synergies of THB13b in FY25E and THB17b pa from FY26E onwards.

MST upgraded TRUE from HOLD to BUY as the counter now offers a potential total return of 10.2% (8.7% upside to THB5.0 TP + 1.5% FY23E dividend yield) after the 7.6% price decrease on 22 Nov. However, MST still preferred DTAC over TRUE as the former offers higher upside to the target price (27.0% upside for DTAC vs 8.7% upside for TRUE). Target prices for TRUE and DTAC are based on the New Co’s fair value of THB8.33/share and the specified swap ratio for TRUE and DTAC shares.

MST pointed to the reason behind its preference of DTAC over TRUE, saying that by the end of the merger process, TRUE and DTAC shares will be automatically converted to shares of the New Co in 1Q23E. With THB1 million, investors can buy 24,845 shares of DTAC at the market price of THB40.25/share, which can be converted to 152,408 shares of the New Co (based on the swap ratio of 1 DTAC share for 6.13 New Co shares). Alternatively, an investors can use that THB1 million to buy 217,391 shares of TRUE, which can be swapped for 130,474 shares of the New Co. (based on the swap ratio of 1 TRUE share for 0.6 New Co share). In conclusion, buying DTAC shares (as opposed to buying TRUE shares) allows an investor, given a specific amount of money, to obtain 16.8% more shares of the New Co.