JP Morgan has upgraded the target price of Advanced Info Service Public Company Limited (SET: ADVANC) to THB 330 per share, citing a move to extend the target to December 2025 and an upward revision in the full-year forecasted net income for 2026. The surge in profit expectations is primarily attributed to reduced spectrum expenses.
The new target price by JP Morgan on ADVANC is now the highest among all analyst recommendations in the market, which has 24% upside from the closing price of THB266 per share on October 29, 2024.
JP Morgan notes that ADVANC currently shares the 2.1 GHz spectrum with National Telecom Public Company Limited (NT) for an annual fee of THB 3.9 billion until the license expires in 2025. Potential acquisition of the spectrum could lead to substantial cost efficiencies for ADVANC, with estimated annual savings surpassing THB 2 billion starting from 2026.
In 2023, ADVANC’s Free Cash Flow to Firm (FCFF) stood at THB 23.5 billion. JP Morgan anticipates this figure to surge to around THB 41 billion in 2024, driven by revenue growth, cost efficiencies, and reduced capital expenditures. With a current leverage ratio of 2.5x ND/EBITDA, JP Morgan believes that ADVANC is quite content and does not intend to preemptively repay its debts.
Following the 3BB acquisition, options for significant merger and acquisition activities are limited. The funding necessities for a potential virtual bank project are expected to be modest since capital investments will be divided among ADVANC’s joint venture partners.
Consequently, JP Morgan believes that the enhanced Free Cash Flow (FCF) could prompt ADVANC to increase its dividend distributions. JP Morgan has revised its Dividend Per Share (DPS) forecasts for FY2025 and FY2026 upwards by 13% and 17%, which leads to an estimated DPS of THB 10 in 2024, THB 12.3 in 2025, and THB 14.8 in 2026.
Additionally, the analyst also views expensive spectrum auctions as a risk to dividend payouts.
