Kiatnakin Phatra Sec Eyes ADVANC at THB275, Seeing Growth from FBB with Decent Dividend Yield

Analyst sees nearly 30% upside to Advanced Info Service Public Company Limited (SET: ADVANC)’s target price in the light of its growing FBB operation after the acquisition of 3BB late last year.

Kiatnakin Phatra Securities (KKPS) stated that it had fine-tuned 2024-25 estimates post 4Q23 results, which it lowered estimation by less than 5% for both years, but still in line with the management’s guideline. CAPEX had also been lowered to meet with guidance as well.

Estimates of KKPS are in line with the management’s upper-end guidance with mobile revenue expecting to grow 4.3% this year, while core revenue is expected to grow 15.7%, versus the company’s 13-15% guidance. One key growth driver is the consolidation of 3BB that should push the fixed broadband (FBB) revenue to grow 119% in 2024. KKPS is now expecting 16% EBITDA growth in 2024 versus 14-16% from the guidance.

With the consolidation of 3BB, KKPS expected FBB revenue to account for 19% of ADVANC’s core revenue in 2024, up from 8% during 1Q23-3Q23, which was prior to the consolidation in November.

Debt to EBITDA increased due to the drawn down to fund 3BB and JASIF. Net debt to EBITDA rose from 0.9x in 3Q23 to 1.2x in  4Q23, but with positive cash flow and growing EBITDA, it should gradually decline to 0.9x by the end of this year and 0.7x in 2025.

Additionally, KKPS recommended “BUY” on ADVANC with a target price at THB275.00 per share on the back of decent yield. KKPS expected ADVANC to post 30.9 billion baht of net profit in 2024, 35.4 billion baht in 2025 and 40.7 billion baht in 2026. More importantly, dividend yield in 2024 is expected to grow from 4.02% in 2023 to 4.57% this year, 5.20% in 2025 and 5.99% in 2026.