What’s New: AIS recorded a strong start to the year, beating on consensus for topline and EBITDA. Mobile saw better trends as tourism improved, alongside continued ARPU growth for both mobile and fixed. EBITDA also trended ahead of topline, leading to improved profitability. We stay Buyers of AIS with a THB 285 price target given its new market leadership in broadband (45% share), benign mobile environment and its exposure to the structural trend of enterprise digitalisation in Thailand.
FY24 guidance (retained).
- Core service revenue: 13-15%, driven by TTTBB and convergence (vs Consensus +8.6%)
- EBITDA: 14-16% (vs Consensus +12%)
- Capex (excluding spectrum): THB 25-26bn (vs. THB 30.1bn for consensus)
Shareholder remuneration: The company remains committed to pay at least 70% of its net profits as dividends. (FY23: 89%).
Q1 2024 marked the first quarter including the full impact from TTTBB acquisition. Headline figures were better than expected at all levels. Group service revenue rose 17.6% YoY, ahead of consensus by 5.7% as FBB outperformed expectations. Mobile accelerated to +3.7% YoY from 1.8% on the back of improved tourism and a better ARPU trend. This was primarily driven by an acceleration in prepaid ARPU growth (+12.4% from 8.1%) and an easing postpaid ARPU decline (-0.3% from -1.3%), suggesting that mobile competition is going in the right direction. This is a positive read-across for TRUE.
Fixed broadband grew by 41% sequentially to THB7.1bn (13% of revenue) as it recorded the full quarter impact from TTTBB. Sequentially, broadband ARPU was up by 1% to THB 496. Finally, Enterprise and others grew 26% YoY on higher contribution due to TTTBB.
The strong topline translated to an EBITDA beating consensus by 5.9%. It rose 23.1% YoY off a sharp decline in marketing costs, with margins expanding by 3.8pp YoY to 52.1%. Clearly, AIS was quick to extract cost synergies by optimising its sales channels. Despite higher finance costs due to higher debt incurred for the TTTBB acquisition, net profit still rose up 25% YoY. Consequently, net profit margin also ticked higher by 1.45pp YoY to 15.9%.
Impact of TTTBB: Following the integration of TTTBB since Q4 last year, AIS was unable to provide separate results excluding TTTBB. We had earlier estimated contribution at around 9-10% and even excluding this, service revenue still showcased an acceleration.
KPIs were strong: As mentioned, mobile ARPU continued to uptrend off better prepaid and postpaid recovery. Net additions accelerated to 408k (117k in Q4) to reach 45m subscribers. It added another 695k 5G subscribers, taking 5G penetration to 22%.
Fixed KPI saw an ARPU growth up by 1% sequentially, driven by up and cross sell initiatives targeted at high quality customers. Broadband saw another 72k net additions to reach 4.8m subscribers.
Conclusion
A strong start to the year for AIS, with leverage improving sharply to 2.5x from 2.9x last quarter. On Mobile, we believe it has the potential to surprise positively given the importance of tourism and the benefit of moving to a 2-player market. Given only 50% broadband penetration, we anticipate further upside for AIS driven by its new market leadership in the FBB space if it executes well. Of the two operators in Thailand, we prefer TRUE at this stage given its higher price upside as it rides on the mobile recovery theme and deliver on its bold but reasonable THB 250bn synergies. We maintain our Buy call on AIS with a THB 285 price target.
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