Random Thoughts: Bitcoin, TPP, DTAC
Bitcoin
Is it possible that bitcoin has replaced gold as the go to safety currency during times of volatility and political turmoil? As ridiculous as this may first sound it may very well be the case when you look at these charts. We’ve seen the dollar go on a massive run in the past few years, the China slowdown stories, Brexit, Trump, political crises etc etc and gold has been relatively quiet whereas bitcoin has been on a rampage. A bubble? Or a shift in how its viewed? A new asset class? A better way to hide $? An easier form of transporting wealth? I don’t know but these could be questions to ask.
Chart: Bitcoin – 5 years
Chart 2: Bitcoin vs Gold
Goodbye TPP
It’s been on my mind since the beginning of last year when I had a discussion with the Head of Research of a brokerage firm in Vietnam. He was then of the viewpoint that TPP wouldn’t go ahead and opining that Vietnam isn’t the wonderful growth story that the locals and international investors believe. TPP was going to be one of the largest major trading agreements amongst nations or a way to contain China’s influence and presence within the region because since it was first being discussed and negotiated China came out swinging with the RCEP and the AIIB effectively to counteract the TPP. Now with Trump cancelling it, the US has effectively handed the region over to China and we’ve seen this with the Philippines quickly shifting to China and even Vietnam, traditional enemies with China, being called a Comrade 2 weeks ago, a first in their history. What does this mean for us? Not much, as you’ve probably noticed in the past few years you no longer see European nor American firms bidding for major projects in this part of the world, its typically the Chinese, Japanese and Koreans that are going throughout the region to participate in any one of SE Asia’s major infrastructure projects. Though I do wonder if this means we’re going to see Japan re-evaluate their positioning in Asia and I’m very curious how they are going to react to this change.
DTAC
True Corp has killed DTAC. That has been my thinking for the longest time when you see how aggressive True has been in spending a fortune to capture the market share it has today. DTAC’s latest earnings came out with management announcing that the dividend would be suspended which is incredible for a company in an industry which has utility like characteristics. The company stated:
- “They would consider having DTAC stand-alone business off-set retained earnings losses with additional paid in capital in order to allow a dividend in the future
- The suspension of the dividend would help prepare the balance sheet for the acquisition of spectrum (Net debt-to-EBITDA was 1.1x compared to 1.4x last year)”
Now there’s a few thoughts I have here, this could be actually a good thing for the business, a stronger balance sheet, a refocus on marketing, shifting the public perception of a poor network when in reality it’s just as good as True and AIS. I wouldn’t be too surprised to see DTAC potentially double (don’t laugh too loudly) if the following scenario plays out:
- They are able to secure TOT’s 2300 MHz spectrum at a price far cheaper than what AIS and True paid for their respective spectrums’, a clever lady pointed out that the new spectrum may only be THB 17-20 bn, so thats a depre of ~ 1.5- 2bn p.a.
- Accounting wise they have THB 16 bn of D&A that ends in 2018, (note net profit peaked in 2011 at 11.7 bn, 2016 was 2 bn), so that is a huge potential jump and it is only trading at 4x EV/EBITDA
- AIS doesn’t go mad a la True and come out with crazy marketing packages
- True will have a new CEO that isn’t from the family, potentially he/she will have to be fiscally more responsible and this implies that we won’t see an aggressive customer acquisition strategy.
- DTAC was known to be the king’s of marketing, they could very well reclaim that crown and grow their user base again.
- So with EBITDA still @ THB 27 bn, potential growth in revenues with a proper marketing campaign, a bottom line that could show a jump of 10x, a potential reinstatement of dividend payment may make this company/stock attractive again.
Of course the above may not happen and the company could be squeezed by True and AIS further and its earnings and cashflow continually erode. Who knows? But its fun to imagine the what if’s.
Aekapop
Agree on all your points on DTAC , but I can’t help but think that much of this is already in the price.
xavi
Yes, I agree, DTAC is like a coin flip depending on if you are positive or negative on the telco sector going forward and how much risk you can stomach.
On another note, impressive subscriber additions for AIS in the 4Q in their quarterly report. I thought that was a typo for a minute but looks like their subsidy and marketing efforts are bearing fruit.
xavi
Christ this latest court decision has taken a decent chunk out of my renewables portfolio. Pon, any thoughts on this?
Thanks
Xav
Pon
amazing effing Thailand.
looks like its a hunt against crooked local politicians that did jv’s with some renewable players, if the plants weren’t approved by the local community then they are probably going to lose their ppa’s is what I’ve heard. Who knows, we’ll hear more during the week.
Jay
EA down 12.45% at the close today, jeez