Advancements In 5G And AI Will Improve Operational Efficiency And Customer Experience

Key Takeaways

• Network consolidation and modernization are expected to enhance customer experience, optimize coverage, and improve revenue and net margins.
  
• Expansion in 5G and beyond connectivity solutions could create new revenue streams and support long-term earnings growth.
  
• Reliance on network modernization and potential EPL rights loss pose risks, while slower growth and competitive pressures may impact revenue and financial strategy.

Catalysts

Provides telecommunications and value-added services in Thailand.

• True Corporation's focus on network consolidation and the modernization of 18,000 towers by Q3 2025 is expected to enhance customer experience, optimize coverage and efficiency, and lead to higher revenue and improved net margins.
  
• The company's effort to shift 30% of transactions to digital by the end of the year and the development of AI-driven services is likely to drive down operational costs and increase net margins.
  
• True Corporation's advancement in 5G, along with personalized lifestyle services, has resulted in higher ARPU and increased data usage, which could lead to an upward trend in revenue growth.
  
• The ongoing synergy realization, process automation, and performance management framework are expected to continue to reduce OpEx and improve EBITDA margins.
  
• Commitment to enterprise growth with a focus on beyond connectivity solutions like managed network services and cybersecurity, particularly in key sectors, is likely to drive new revenue streams and bolster long-term earnings growth.

True Corporation Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming True Corporation's revenue will decrease by 0.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from -5.3% today to 10.1% in 3 years time.
• Analysts expect earnings to reach THB 20.7 billion (and earnings per share of THB 0.62) by about April 2028, up from THB -11.0 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting THB27.6 billion in earnings, and the most bearish expecting THB15.4 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 29.6x on those 2028 earnings, up from -37.8x today. This future PE is greater than the current PE for the TH Telecom industry at 25.9x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.24%, as per the Simply Wall St company report.

True Corporation Future Earnings Per Share Growth

Risks

• The company's reliance on network modernization presents a risk, as further write-offs and onetime expenses are anticipated due to the ongoing modernization process, potentially affecting net margins and net profit.
  
• Slower growth in certain business segments, such as mobile phone service revenue and online segments compared to competitors, may impact revenue and put the company's growth projections at risk.
  
• The potential increase in competition for spectrum acquisition, with a focus on acquiring new spectrum by competitors, may lead to higher costs than planned, affecting the company’s future capital expenditure and financial strategy.
  
• The potential loss of English Premier League (EPL) rights could lead to higher churn among customers who subscribe specifically for this content, negatively impacting ARPU and revenue from the Pay-TV segment.
  
• The forecasted merger activities in the regional market may necessitate strategic adaptations from True Corporation, which could involve unforeseen expenses or shifts in focus, affecting overall financial performance.

Valuation

• The analysts have a consensus price target of THB14.433 for True Corporation based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of THB18.0, and the most bearish reporting a price target of just THB10.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be THB206.0 billion, earnings will come to THB20.7 billion, and it would be trading on a PE ratio of 29.6x, assuming you use a discount rate of 7.2%.
• Given the current share price of THB12.0, the analyst price target of THB14.43 is 16.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.