Dao Securities (Thailand) has adjusted its stock recommendation for Total Access Communication Public Company Limited (DTAC) to “buy” and raised its target to 49 baht from 27 baht, reflecting the synergy benefit. From the merger with True Corporation Public Company Limited (TRUE) after the Central Administrative Court rejected the petition to postpone the merger. As a result, the deal can continue. It is expected to be completed in Q1/2023.
DTAC’s 4Q22 normalized profit is estimated at Bt471mn (-22% YoY, flat QoQ), down YoY from slow revenue recovery. (main service income flat YoY, QoQ) and expenses (GPM -5ppt YoY, -1ppt QoQ from higher network investment and electricity cost) around Bt2.4bn (-29% YoY), within our estimate. Although our 2023 norm profit is maintained at Bt2.8bn (+20% YoY), recovering from the economy and returning tourists.
Share prices have underperformed the SET by around -3% over the past month, which is expected to overlap after the NBTC was sued and sought a court order to suspend the deal by the Consumer Council of Thailand and cancel the tender offer price. The deal did not close within a year, however, the Administrative Court recently raised the petition to suspend the deal, allowing the merger to proceed. The stock is expected to outperform again after the market weighs the synergy benefit from the upcoming merger in 1Q23.