TeleChoice International Ltd - CIMB Research 2017-02-08: Enabling customers to be future-ready

TeleChoice International Ltd - CIMB Research 2017-02-08: Enabling customers to be future-ready TELECHOICE INTERNATIONAL LTD T41.SI

TeleChoice International Ltd - Enabling customers to be future-ready

  • TeleChoice International Limited (TLC) provides mobile network engineering solutions and info-communications solutions and distributes mobile phones.
  • As at 3QFY16A, TLC was in a net cash position of S$25.8m (23% of its market cap based on the closing price on 7 Feb 2017).
  • In its 3Q16A results announcement, management guided that the performance for 4QFY16 and FY16 would be lower than the corresponding periods of 2015.
  • As at 7 Feb 2017, TLC traded at a historical FY15A P/BV of 1.65x versus its peer average of 3.84x.



Company background 

  • We met with TeleChoice International Ltd (TLC) management on 7 Feb 2017. 
  • TeleChoice International Ltd (TLC) is a regional diversified provider and enabler of innovative info-communications products and services. 
  • Incorporated in Singapore on 28 Apr 1998 and listed on the Mainboard of the Singapore Exchange on 25 Jun 2004, TLC is a subsidiary of Singapore Technologies Telemedia Pte Ltd, a strategic investor in communications, media and technology businesses.


Three key segments 

  • TLC has three key business segments. 
    1. Personal communication services (PCS - 71% of FY15A sales) distributes mobile phones and wearables, 
    2. info-communications technology services (19% of FY15A sales) is a system integration business targeting enterprises, and 
    3. network engineering services (NES - 10% of FY15A sales) provides network engineering services to regional telcos.


Key risks 

  • Key risks, according to management, include a rapidly changing industry (TLC needs to continually keep itself updated on industry developments and evaluate their potential impact on its businesses) and customer concentration. 
  • According to its FY15A annual report, one customer in the PCS segment and one customer in the NES segment combined represented 37% of FY15A sales.


Management’s outlook statement 

  • In its 3Q16A results announcement, management guided that based on the current outlook and barring any unforeseen circumstances, the group expected the operating performance for the 4QFY16 and the full year of FY16 to be lower than the corresponding periods of 2015.


Net cash balance sheet 

  • As at 3QFY16A, TLC was in a net cash position of S$25.8m (23% of its market cap based on the closing price on 7 Feb 2017). 
  • For 3QFY16A, operating cash flow was S$24.8m and free cash flow was S$24.3m.


Historical valuations 

  • As at 7 Feb 2017, TLC traded at a historical FY15A P/BV of 1.65x versus its peer average of 3.84x.
  • TLC’s historical ROE for FY15A was 14.0% versus the peer average of 6.7% and its historical FY15A dividend yield was 5.9% versus the peer average of 2.5%.


NOT RATED
Target Price: N/A
(Bloomberg Consensus Target Price: S$0.34)




William TNG CFA CIMB Research | http://research.itradecimb.com/ 2017-02-08
CIMB Research SGX Stock Analyst Report NOT RATED Maintain NOT RATED 99998 Same 99998



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