TeleChoice International - Tayrona Financial Research 2018-08-27: Expands Service Offerings With New Huawei Concept Stores

TeleChoice International Limited - Tayrona Financial Research 2018-08-27: Expands Service Offerings With New Huawei Concept Stores TELECHOICE INTERNATIONAL LTD SGX:T41

TeleChoice International Limited - Expands Service Offerings With New Huawei Concept Stores


Enterprise business grew year-on-year, but consumer business dragged on group profitability in 1H18.

  • TeleChoice’s 1H18 revenue and PATMI fell by 8.5% and 39.0% respectively to S$241.2m and S$1.28m.
  • Both the ICT and Network Engineering segments reported higher profit before tax in 1H18. However, profit before tax still fell by 30.4% to S$2.0m due to S$1.1m less contribution from the Personal Communication Solutions Services (PCS) segment whose profit before tax fell to S$2.2m in 1H18.



Taking steps to deepen capabilities and widen market reach.

  • TeleChoice’s Personal Communication Solutions Services (PCS) segment was affected by the loss of the StarHub Logistics Contract which expired on 30 June 2017.
  • In 2Q18, the absence of new handset launches also affected PCS’s revenue. TeleChoice has since strengthened its range of services in Singapore even as network operators move to contain costs. These services include the provision of additional StarHub services for handset home delivery and set top boxes.

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  • In June 2018, TeleChoice also expanded its relationship with handset principal Huawei beyond distribution to retail management, through the opening of two new Huawei Concept Stores. These stores expanded the group’s retail network to 14 outlets and there are plans to open two more Concept Stores in the future.


2H18 likely to be better than that of 1H18.

  • TeleChoice’s ICT and Network Engineering segments benefited from higher software sales and higher orders for engineering services in Singapore respectively in 1H18. The ICT division has won significant contracts in the public, finance, hospitality and education sectors.
  • TeleChoice’s PCS segment will also likely benefit from new mobile handset launches in 2H18. Hence, we can expect TeleChoice to perform better in 2H18 as compared to 1H18. This outlook is also in line with the guidance provided by the group.


Regional opportunities to remain as key catalysts.

  • While TeleChoice strengthens its presence in its existing markets, it has been eyeing regional opportunities for the PCS and network engineering segments. 
  • For the PCS segment, TeleChoice can replicate its retail, fulfilment and supply chain management capabilities in new markets, whereas 4G network expansion in developing markets presents opportunities for the engineering business.


Maintaining rating and valuation.

  • TeleChoice has been consistently paying out 1.6 cents of dividend per share each year to yield 6.2% over a share price of S$0.260. The group’s balance sheet also remains strong with net cash of S$11.5m or 2.5 cents per share. Hence, we maintain our Overweight rating and valuation of S$0.340.
  • Currently, TeleChoice trades at 17.4x FY18F P/E. Our valuation of S$0.340 translates to 16.5x FY20F earnings. Hence, the realization of any upside will depend on the group’s ability to revert to growth and meet our forecasts.





Liu Jinshu NRA Capital Research | Tayrona Financial 2018-08-27
SGX Stock Analyst Report OVERWEIGHT Maintain OVERWEIGHT 0.340 Same 0.340



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