SmarTone's net profit dropped 3% to $459m

But it's total revenue remained strong.

According to Maybank Kim Eng, 1HFY6/13 net profit dropped 3% YoY to HKD459m, 2% below its estimate. Although total revenues grew 16% YoY with stronger-than-expected handset sales, EBIT declined 4% YoY due to higher D&A charges on the 4G LTE investment. 

"Management maintained a 100% dividend payout and declared an interim DPS of HKD0.44/share."

Here's more:

Implication: Expect stronger service revenue growth in second half. Service revenues increased 2% YoY in 1HFY6/13 due to the weakening roaming business. However, we maintain our view that the roaming business will recover in 2HFY6/13F along with the improving economy.

Nevertheless, local mobile service revenue grew 9% YoY in 1HFY6/13 with 9% increase in total number of mobile subscribers and 8% increase in local postpaid mobile ARPU, which demonstrated that the premium subscriber focus has been supporting the service revenue growth of SmarTone.

We stay positive on SmarTone’s superior network quality and estimate service revenue to grow 5% YoY in 2HFY6/13F. Expect D&A charges to stabilize. D&A charges rose 21% YoY in 1HFY6/13 while CAPEX increased by about HKD300m YoY to HKD600m.

Management maintained its HKD1.2b CAPEX guidance for FY6/13F, and expects CAPEX to fall in FY6/14F. Therefore, we expect the D&A charges to stabilise and to grow at
8% YoY in FY6/14F.