M1 – CS

1Q FY10 preview: higher sales; marginally lower EBITDA

• M1 will report its 1Q FY10 results after the market closes on Friday this week. We are looking for 1Q FY10 revenue to grow 16% YoY to S$216.2 mn, driven mainly by higher handset sales and fixed network revenues. We expect the arrival of compelling smartphone models, including the iPhone, to drive handset sales.

• However, higher handset sales could drive margins lower for the quarter. At the EBITDA level, we are looking for a 1% YoY decline in 1Q earnings to S$76 mn.

• During the FY09 results briefing, management mentioned that it would review its capital structure once refinancing of the S$250 mn loan was completed. The completion of the refinancing exercise late last month should pave way for a capital structure review – potentially a higher/special dividend payout. We look forward to management's guidance on any capital structure review at the post-results conference call this Friday.

• We maintain our OUTPERFORM rating on M1 with a target price S$2.60. This represents 24% upside from current levels.

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