Analysts Eye Telco Plays with Upside Risks from Market Consolidation, Resilient to Politics

Kasikorn Securities sees trading opportunities in Thailand’s ICT sector due to price misalignment, and maintains a bullish outlook on the sector, stating that the telcos’ operations are resilient to political unrest and have upside risk from market consolidation, calling TRUE as the top sector pick. 

With a year-to-date increase in share price of 8.2%, Advanced Info Services Pcl. (SET: ADVANC) is the second best performer among the ASEAN-6 top tier telecom counters and has outperformed the SET’s loss of 8.5%. Meanwhile, True Corporation Pcl. (SET: TRUE) had a decline of 13.7% in its share price.

The brokerage firm has maintained its positive view on the ICT sector, noting that its optimistic earnings and valuation forecasts were built on the expectation of subdued regulatory intervention by a new government. Statistics show that telco operations are resilient to political turmoil, despite their stock values seem to take a heavier hit. Also, Kasikorn Sec. believes the market is overly pessimistic regarding the earnings upside potential of TRUE’s prospective opex and capex synergies.

In a worst-case scenario, ADVANC’s fair value would be THB188.5 and TRUE’s would be THB6.12, reflecting a further downside of 13.5% and 7.3%, respectively, from their current market prices. Meanwhile, if everything goes perfectly, the fair value of ADVANC and TRUE would be 7.3% and 56.4% above their respective market values.