Samart Corporation PCL February 2009 1
Background 1950: Started as a radio repair shop in Saraburi Province,North of Bangkok 1985: Started large scale system integration projects 1992: Awarded first NMT cellular concession in the Kingdom of Cambodia 1993: SAMART was listed in Stock Exchange of Thailand 1995-96: SAMTEL was listed in Stock Exchange of Thailand 1996-97: Samart Enters Paging services & GSM 1800 services. (Divested later in 2000) Telekom Malaysia acquires 25% in Samart 2001: Samart wins 32 yr concession to build, own & operate Air Traffic Management Services in Cambodia 2003: Samart I-Mobile a handset and content distributor company was listed in Stock Exchange of Thailand 2005: Samart was awarded Royal Garuda by H.M. The King of Thailand for its services to Thai Society 2006: Samart enters utilities Sector. - Won 10 yr contract to supply 16 MWe to subsidiary of Siam Cement in Cambodia. - Won 10 yr waste management contract at Suvarnabhumi Airport Free Float 41% Shareholding Structure 19% Telekom Malaysia Vilailuck Group 40% Total Shares Outstanding: 976 mill 2
Business Structure Listed in 1993 976 mill shares Market cap = USD 150 mill 70% 59% ICT Solutions & Services Mobile multimedia 600 mill shares 4,300 mill shares (par Bt. 0.10/share) Mkt cap = $ 115 mill Mkt cap = $ 210 mill TECH RELATED BUSINESS 100% SAMART Inter Holding 70% 100% 100% 60% Security solutions TV/Satellite antenna manuf Call Center Waste Mgt@ new airport 100% 100% Air Traffic Mgt As a holding company, we aim to invest in profitable technology related ventures, thus creating a investment portfolio generating above average returns for shareholders Power plant 23 MW 3
Revenue & NP Breakdown by Businesses 2005 2006 2007 9M-2008 Total Revenue 18,858 31,002 19,649 11,960 (in Baht million) Contribution by : SIM 69% 79% 78% 70% SAMTEL 11% 9% 11% 17% Other Biz 30% 12% 11% 13% 2005 2006 2007 9M-2008 Total Profit 584 1,990 574 322 Contribution by : SIM 48% 14% 33% 37% SAMTEL 27% 12% 13% 22% Other Biz 25% 0% 54% 41% Extra Gain* 0% 74% 0% 0% * Disposal of assets 4
Samart Inter Holding (In kingdom of Cambodia) Flights Revenue ($ mill) - Monopoly Concession to manage Nationwide Air Tarffic till year 2033 (concession is extendable with further investments) - Tariff collection from airlines (inbound & over flights) - THAI, Vietnam Airlines, British Airways, Qantas Bangkok Airways, Qatar Airlines, Singapore Airlines and Malaysian Airlines are top tier clients - High growth potential from air traffic movement (in and out of Cambodia) - CATS increased its tariff by 15% since July 2008 60000 50000 40000 30000 33000 15 37000 16.5 41400 18 50000 20 55000 23 25 20 15 10 - Samart Corp charges 15% of CATS revenues (USD 3.45 mill for 2008) as a management fees per year - On a DCF basis with WACC of 10%, the NPV of CATS is USD 274 million 20000 10000 5 - Samart is exploring ways to unlock its value in CATS 0 2004(A) 2005 (A) 2006 (A) 2007 (A) 2008 0 Strategy: Explore similar investment opportunities in Indo-China region 5
Samart Inter Holding (In kingdom of Cambodia) - 16 MWe contracted capacity beginning 2008 till 2017 - Off taker is Kampot Cement (wholly owned by Siam Cement, Thailand) - USD 6 mill/year in revenue guaranteed per year - Fuel is supplied by off taker - In operation since Jan 08 - Potential capacity expansion by off-taker Strategy: Explore opportunities in utilities sector in Kingdom of Cambodia 6
Tech Related Business 1,600 call center representatives Winner of 2 awards in 2007 Turnkey Outsourcing Strategy -Govt. Call Center 1111 -FDA Call Center -BUG 1113 -Bank, Insurance Cos Build a backlog of contracts from Govt & private sector clients Increase portion of outsourcing revenues to 70% from 50% at present Invest in training call agents to ensure highest quality Explore M&A or listing As a founding company of the Group, Samart Engineering is well known for TV antennas and Satellite dishes. It controls over 50% of market share in Thailand Market leader in Ku & C band antennas Strategy Over 50% market share in TV antenna Increasing trend for Ku band dish Work with TV operators in pushing ku band dish and set top box Explore opportunities in TV broadcasting Digital TV, etc. 7
Samart i-mobile Public Company Limited 1993: Started as a handset & pager importer to complement Samart s GSM cellular & paging operations 1997: Received license to operate Audiotext services 2002: Launched Multimedia Content services under brand name BUG 2003: Listed in Stock Exchange of Thailand and raised Baht 1,210 mill (USD 30 mill) 2004: Launched first house brand handset I-mobile VDO phone. Sold 100,000 units in six months 2005: Expanded handset business to Malaysia, Cambodia. Attained 3 rd position (15% market share) in Thailand 2006: Telekom Malaysia acquired 24.4% stake in SIM from Samart and opened up opportunities in newer markets such as Indonesia, Bangladesh & India I-mobile became second brand in Thailand with market share of 22%. A total of 2 mill hand sets were sold in domestic markets & 2.4 mill were sold in international markets 2007: JV with Celcom and started retail operations in Malaysia. A total of 4 mill handsets were sold. Market share in Thailand =28% Shareholding Structure Free Float Telekom Malaysia Samart Corp Total Shares: 4,300 mill 8 2008: Prime mister s award for Thai owned brand 8
Key Strengths - # 2 Brand in Thailand backed by Strong Product Innovation - Dec 2004 First VDO phone in Thailand - Sept 2005 First MP3 phone in Thailand - Mar 2006 First TV phone in Thailand - Jun 2006 First 8 mill pixel camera phone - Jan 2007 First inbuilt FM antenna speaker phone - Jan 2007 First phone with walkie-talkie function - 2008 Dual SIM with standby function Motion sensor function - Regional Foot print 2005 Foray into Malaysia Market (exclusive with Nokia for 3G handsets) Appointed dealers in Bangladesh, Lao, Cambodia 2006 Started operations in Bangladesh, Indonesia, Vietnam & India - Market Leader in voice content market 80% of voice content market 9 9
Leveraging Strengths Theme: Devices, applications, services based on Mobility concept delivering enriched lifestyle experience to the end users Device Applications i-music Ringtone Full Song i-clip Wallpaper VDO Clip i-movie Movie Detail Show Time i-horo Gypsy Birthday Etc. i-sport Football, etc. Match/Result i-promotion Discount Rewards Privileges i-game Adventure,etc Multiplayer i-news Local International i-lotto Result Analysis i-food Hit Restaurant Search i-trip Hit Hotel Weather i-application Stock watch Biz info Total 24 i-mobile handset models to be launched in 2009 Upgraded versions of applications thru i-link 10
Business Structure Samart i-mobile i PLC Mobile Business Distribute i-mobile and other branded mobile handsets through Traditional Trade: Key dealer, SMD, Franchise Modern Trade: i-mobile shop and hyper market Multimedia Business Provide Voice & Non Voice information / content through multi service channels / devices Provide easy to access to content through i-link service International Business Export Successful SIM Business Model Malaysia Indonesia Vietnam, Laos, Cambodia Bangladesh India M-East International wap.bug2mobile.com 11
Own Designed Products 75% of total handsets are designed in-house Product positioning PDA (Sense) 2004 Off the shelf, Quick shipment High end (9 Series) 2005/6 Co-design handset 3 moths shipment Unique features Mid end (6 Series) Low Mid end (5 Series) 2007/8 Own design handset 4-5 moths shipment Customized features Low end (3 Series) Super low end (1&2) 12
Handset Market Perspective Thai handset market forecast 2007:2009 Market share by brands: 2008 Source: CNS Source: CNS The market to de driven by mid-low, low priced handsets ( Baht 4,000 and below) Mobile Penetration in Bangkok to reach 120% by end 2008 13
Improving Margins Total Handsets Sales & Gross Margins Handset sales: Domestic vs Inter International Domestic - Improving handset margins is due to higher margin phones (mostly the low-end) - Margin trend is likely to be sustained in the neighborhood of 10%-12% in 2009 14
International Sales Malaysia Bangladesh Indonesia Vietnam Handset Sales by volume 2007 Handset Sales by volume 9M-2008 15
Growth Outlook: Handsets - Presently dominates 28% market share in Thailand, 15% in Malaysia & 5% in Indonesia - Increasing growth opportunities S-E Asia in low penetration countries such as Bangladesh, India, Indonesia & Vietnam - About 50% of existing handset sales are in overseas markets - Set up key hub in Dubai for exports to African continent, one of the least penetrated region in the world - 2008 will witness 4,000,000 i-mobile handset sales, our aim is to sale 10,000,000 million handsets by year 2011 16
Distribution Channels: 2009 A total of 613 (from 507 in 2008) outlets in domestic market (including shops, franchisees, Kiosk, modern trade) A total of 170 (from 104 in 2008) outlets in international market (including shops, franchisees, Kiosk, modern trade, etc.) 17
Content Business: Unique positioning Voice BUG1900 Premium Phone Service 1900-1900-XX Tariff: 6-9 bt/min BUG1113 24/7 live directory services Tariff: 7 bt/min Non-Voice BUG2Mobile ShowDed Community Blog i-sport App Solution Subscription based applications New Business EDT Horoscope Portal International Exporting application platform to the region 18
Content Business Model We bundle content in every single handset sold thru us, thus enabling higher content usage High margin business! (GM >33%) We are a neutral content provider (access by 50 mill mobile & 10 mill fixed line users) Act as an content aggregator (work with over 100+ content/media providers) Content is accessible by all fixed line and mobile subscribers - Revenue sharing with operators - up to 50% for voice revenue - up to 20% for non-voice contents 50% content is in-house, 50% outsourced Biggest in sport content provider in Thailand 19
Content Business: Business Model Accessing Voice Content via Fixed line Accessing Voice & Non-Voice Content via Fixed line move Operators keep 40% of revenue (as they do billing, etc.) for voice content Operators keep 50% of revenue for voice content & 20% of revenue for non-voice content In house Outsourced 50% of content is produced in-house and remaining 50% is outsourced or aggregated 20
Content Strategy 2009 1)Prepare for 3G Interactive Chat 2) Secure current user base Develop more strategic partners (ietrue Move ) and find new revenue stream Horo Chat VDO Conference Agent Launch sport SIM with all operators with privileges Change status of competitors to partners Interactive Game Rich content/streaming Turn existing customers to be more subscription base 21
Revenue/NP/Dividend history (all figures in baht million, except for dividend)) Revenues Revenue breakdown by segment Net Profit Dividend & Payout Ratio Incl Baht 115 mill gain from disposal of BLISS/TTM 22
Guidance 2009 - Consolidated revenue growth in the neighborhood of 10%-15% - Overseas handset sales and domestic content sales to be key drivers - 3G opportunity for handset and content sales - Emergence of new business model: - MVNO - Digital TV - Bulk purchase of airtime from operator - Reselling air time (voice & non-voice service) 23
Samart Telcoms: Existing Businesses Know how in VSAT network & applications: - Rural Telephony network in 4,000 villages - School net network in 10,600 schools (ongoing) - Soft switch installation for TOT - Satellite/High speed network for Govt. agencies - Broadcasting on Ku & C band (ongoing) No 1. in Satellite application market POS/EFT market: - Credit card readers, Payment gateway - Fleet solutions - Services to Banks, retailers No 1. in by market Share (terminals sold) Leading SI in ICT field: - New Bangkok International Airport - Government ministries and agencies ( MOI/MOJ/MOD) Top 3 SI in Thailand (Govt projects) 24
SAMTEL Business Structure Network Services System Integration E-Business IT Outsourcing Providing network services & applications Conventional/ IP Satellite Lease Line/DSL Networking Next Generation Network Broadcasting/ Business TV Video Conference,etc. Providing turnkey IT & security solutions for private / government sector Government (Ministry of Industry, Ministry of Justice, Ministry of Defense) State Enterprise Airport (NBIA) Providing specific business process application & services for business effectiveness Payment Solutions e Learning e Logistics Providing full operational services in specific industries (build and operate business) Business Solutions - Provincial Electricity Authority ERP projects ICT Maintenance services -NBIA - Other projects 70% of total revenue 20% of total revenue 6% of total revenue 4% of total revenue - Long-term projects min 5yrs tenure (monthly revenue) - Gross margins of over 25% - Turnkey projects - Budgetary allocation every year - Gross margins of over 18-20% - Largest e learning system in Thailand 5 universities - Automatic meter reading system for PEA - Installation & maintenance - Funded by project finance - Funded working capital 25
Revenue Breakdown: Govt. Clients Dominate 2007 2006 Corporate 15% Corporate 13% Government 85% Government 87% E-Business 7% IP Business 1% IT Outsourcing 3% E-Business 8% IP Business 0% IT Outsourcing 0% System Integration 19% System Integration 21% Network Services 70% Network Services 71% 26
Network Services Project concept Budget availability - The entire process takes approximately 12 months - These projects are sometimes could be carried out as closed bids - Recurring revenue (service income) - Lower risk as contracts are guaranteed by Government bodies Presentation to entry level staff Project economics/ feasibility Approval from agency Rollout - Ability to expand scope or tenure Ongoing & Completed projects: - Rural Telephony network in 4,000 villages (Baht 8,640 million) - School net network in 10,600 schools (Baht 2,580 million) - Soft switch installation for TOT (Baht 1,000 million) - Automatic Meter Reading for PEA (Baht 889 million) Potential projects: - Check inn system outsourcing at Suvarabhumi airport (Baht 5,000 million) 10 year contract - Village internet (Baht 2,500 million) - Softswitch (Baht 1,000 million per year) - Fiber optic/cable maintenance 27
System Integration Project details Draf TOR - The entire process takes approximately 12 to 18 months - The value is from Baht 50 mill to Baht 1,000 million - Built & Transfer projects - Yearly budget allocation from State agencies (the budget size is appox Baht 70 billion per year on IT/Networking) E Auction Contract Signing Implementation Final acceptance Potential projects: - Mostly from following ministries: - Ministry of Interior - Ministry of Defense - Ministry of Justice - Ministry of Labor - Supreme Commander HQ - IP Core project (Baht 900 million) Signed in Feb 2009 28
System Integration Key Project Highlights (Completed & Ongoing) Suvarnabhumi Airport Design & Installation of Airport Information Management System (AIMS) in Consortium with Siemens, ABB, & Satyam (Project Value Baht 2,399 mill) Ministry of Interior Information Super High Way Linking all provincial offices in Thailand (Baht 1,000 mill) Suvarnabhumi Airport Common User Terminal Equipment System (CUTE) (Project Value THB 1,000 mill) ITV Mobile TV Broadcasting Station Ministry of Defense Communication network System (Baht 799 mill) To be completed by 2009 Department of Industrial Works Computer network systems for supporting services 29
IT Outsourcing Project design Budget allocation - Built, Own & Operate, or could be one time deployment -The total value is in the range of Baht 350 million to Baht 4,000 million - Yearly budget allocation from State agencies (the budget size is appox Baht 70 billion per year on IT/Networking) E Auction Contract Signing Ongoing and Completed Projects: - Automatic meter reading (Baht 889 million) - ERP outsourcing for PEA (Baht 3,500 million, negotiations) - ERP outsourcing for MOL (Baht 3,000 million, negotiations) Implementation Potential Projects: - Automatic meter reading phase II (Baht 600 million) - Prepaid electricity meter (Baht 1,000 million) - ERP implementation CAT (Baht 350 million) 30
SWOT Analysis Strengths: - Strong know how in IT, Networking domain - The only sizable player left in Thailand Weakness: - Dependence on Government agencies Opportunity: - Outsourcing from state enterprises - Government spending on ICT sector - M&A in software development Threat: - Price undercutting in e auction for system integration projects 31
Samart Corporation PCL Consolidated Financial Performance 32
Consolidated Financials (all figures in baht million, except for dividend)) 35000 30000 25000 20000 Revenues 100% 90% 80% 70% 2067 2,940 2,098 1,547 2,905 Revenue breakdown by segment 2,713 2,117 2,044 15000 10000 18,858 31,001 19,649 60% 50% 40% 30% 12,578 24,337 15,434 8,369 Related Business ICT Solutions (Samtel) Mobile Multimedia (SIM) 5000 11,960 20% 10% 0 2005 2006 2007 9m-2008 0% 2005 2006 2007 9m-2008 2,500 Net Profit Dividend Payout 2,000 1,500 1,000 500 0 1,990 584 574 322 2005 2006 2007 9m-2008 0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 49% 61% 0.42 0.3 36% 20% 0.36 0.1 2005 2006 2007 2008 70% 60% 50% 40% 30% 20% 10% 0% 33
Balance-Sheet Review (all figures in baht million) 30,000 Consolidated 9,000 Company Only 8,000 25,000 20,000 15,000 6,279 2,569 7,197 7,918 6,308 1,996 1,615 1,742 Current Liabilities Non-Current Liabilities Current Asset Non-current Asset 7,000 6,000 5,000 4,000 682 361 532 1,825 1,623 1,158 421 1,528 1,217 601 934 1,044 Current Liabilities Non-Current Liabilities Current Asset Non-current Asset 10,000 5,000 9,877 6,785 9,489 8,330 6,241 4,774 4,787 4,776 3,000 2,000 1,000 4,821 3,858 3,952 4,008 0 2005 2006 2007 9m-2008 0 2005 2006 2007 9m-2008 Retained Earnings 2,500 2,000 1,500 2,097 2,244 1,000 1,913 500 387 0 2005 2006 2007 9m-2008 34