Stock Name: GPACKET
Company Name: GREEN PACKET BHD
Research House: OSK
Green Packet Bhd (GPacket)
(May 11, 93 sen)
Maintain buy at 94.5 sen with target price of RM1.30: GPacket will announce its 1QFY10 results tomorrow. We expect the WiMAX operator to kickstart the year on a high note with 1QFY10 revenue growth of over 14.5% quarter-on-quarter (q-o-q) on strong subs addition and stable ARPUs (average revenue per user). This would slash its earnings before interest, tax, depreciation and amortisation (Ebitda) losses by more than 49% q-o-q as subscriber acquisition cost (SAC) is expected to continue to trend down on manageable competition. Maintain buy.
The stock's rerating catalyst would be better earnings visibility over the next few quarters on sturdy net adds and as CPE (customer premise equipment) sales gain traction in tandem with mounting global WiMAX deployment.
We expect GPacket to kickstart 2010 on a high and unveil a good set of 1QFY10 numbers. We believe the strong top line in 4QFY09 spilled over to 1QFY10, translating into a +14.5% jump q-o-q, as the broadband net adds momentum snowballed, with more than 30,000 registered during the quarter in line with our expectations.
The encouraging more-than-20% year-on-year improvement in net adds is no coincidence as P1 repriced its W1GGY offerings in March and waived the RM60 registration fee for selected plans to get on par with its peers. Nonetheless, revenue is anticipated to come in below our expectation of 34.3% q-o-q growth. The underperformance could be attributed to the slow albeit recovering corporate voice wholesale and lower average selling prices for its modems. We are not overly concerned with the expected shortfall as the voice division, which typically commands Ebitda margin of 4%-5%, would pick up in tandem with Singapore's economic rebound.
On the flip side, operating costs are likely to be lower than our forecasts on decline in direct expenses whilst SAC is believed to have averaged RM350 per subscriber against our previous assumption of RM375/subscriber on lower modem costs. We expect SAC to ease progressively to RM300 towards end-FY10 after the introduction of WiMAX-equipped laptops in 2H10. Competition remains largely optimal within the WiMAX universe as our quick checks raise the possibility of further delays in Y-Max's launching. Meanwhile, CPE sales are expected to be on track to achieve our forecast of 900,000 units for FY10 as demand picks up ahead of more commercial rollouts in the region. All eyes will be on the upcoming broadband wireless access auction in India as Samsung is already in talks with local mobile operators to lobby for nationwide WiMAX implementation. As a whole, 1QFY10 Ebitda losses are likely to fall within RM31 million-RM32 million, in line with our forecast.
We reiterate our target price of RM1.30 based on eight times FY11 enterprise value/Ebitda. This translates into a lucrative upside of over 30% given the recent share price weakness. - OSK Research, May 11
This article appeared in The Edge Financial Daily, May 12, 2010.
Company Name: GREEN PACKET BHD
Research House: OSK
Green Packet Bhd (GPacket)
(May 11, 93 sen)
Maintain buy at 94.5 sen with target price of RM1.30: GPacket will announce its 1QFY10 results tomorrow. We expect the WiMAX operator to kickstart the year on a high note with 1QFY10 revenue growth of over 14.5% quarter-on-quarter (q-o-q) on strong subs addition and stable ARPUs (average revenue per user). This would slash its earnings before interest, tax, depreciation and amortisation (Ebitda) losses by more than 49% q-o-q as subscriber acquisition cost (SAC) is expected to continue to trend down on manageable competition. Maintain buy.
The stock's rerating catalyst would be better earnings visibility over the next few quarters on sturdy net adds and as CPE (customer premise equipment) sales gain traction in tandem with mounting global WiMAX deployment.
We expect GPacket to kickstart 2010 on a high and unveil a good set of 1QFY10 numbers. We believe the strong top line in 4QFY09 spilled over to 1QFY10, translating into a +14.5% jump q-o-q, as the broadband net adds momentum snowballed, with more than 30,000 registered during the quarter in line with our expectations.
The encouraging more-than-20% year-on-year improvement in net adds is no coincidence as P1 repriced its W1GGY offerings in March and waived the RM60 registration fee for selected plans to get on par with its peers. Nonetheless, revenue is anticipated to come in below our expectation of 34.3% q-o-q growth. The underperformance could be attributed to the slow albeit recovering corporate voice wholesale and lower average selling prices for its modems. We are not overly concerned with the expected shortfall as the voice division, which typically commands Ebitda margin of 4%-5%, would pick up in tandem with Singapore's economic rebound.
On the flip side, operating costs are likely to be lower than our forecasts on decline in direct expenses whilst SAC is believed to have averaged RM350 per subscriber against our previous assumption of RM375/subscriber on lower modem costs. We expect SAC to ease progressively to RM300 towards end-FY10 after the introduction of WiMAX-equipped laptops in 2H10. Competition remains largely optimal within the WiMAX universe as our quick checks raise the possibility of further delays in Y-Max's launching. Meanwhile, CPE sales are expected to be on track to achieve our forecast of 900,000 units for FY10 as demand picks up ahead of more commercial rollouts in the region. All eyes will be on the upcoming broadband wireless access auction in India as Samsung is already in talks with local mobile operators to lobby for nationwide WiMAX implementation. As a whole, 1QFY10 Ebitda losses are likely to fall within RM31 million-RM32 million, in line with our forecast.
We reiterate our target price of RM1.30 based on eight times FY11 enterprise value/Ebitda. This translates into a lucrative upside of over 30% given the recent share price weakness. - OSK Research, May 11
This article appeared in The Edge Financial Daily, May 12, 2010.
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