M1 – Phillip

Positive on Data monetizing

Company Overview

M1 is the 3rd largest Telecommunications company in Singapore. The introduction of NGNBN in Singapore lowered entry barriers to the Fixed Line business, which would allow M1 to venture into the corporate and retail broadband market.

  • 0.8% y-y increase in Net Income, Service revenue healthy with 2.9% y-y growth
  • Positive on S$5.50 uplift in ARPU from data monetizing among 4G tiered data plan customers
  • Higher FY2013 capex guidance of S$130m – S$150m

  • FY2012 final & special dividend of 8.0 cents proposed
  • Maintain Neutral, with unchanged TP of S$2.41.

What is the news?

M1 reported a marginal 0.8% y-y increase in Net profits. Service revenue was positive, with y-y increases in revenue contribution from Mobile telecommunication services and Fixed services. International call services were however down on lower roaming and International calling card revenue. Expenses remain well managed. Net income was below expectations due to under provision of tax in prior year, and lower than expected margins on handsets.

How do we view this?

The biggest positive from this set of results was management’s guidance of an ARPU uplift of S$5.50 from the data monetizing of 4G tiered data plans. We expect to see continued data monetizing, although at a tapered rate due to higher proportion of signups from more cost conscious customers moving forward. Management also guided higher capex in FY2013, at between S$130m and S$150m. This is due to higher expenditure required to meet the high QOS standards set by the government, and the enhancement of the network. M1 also proposed a final and special dividend of 8.0 cents, bringing the total FY2012 dividend to 14.6 cents, which is 0.1 cent higher than FY2011’s total dividend.

Investment Actions?

We adjust our figures to reflect 4Q12 earnings. We continue to expect M1 to deliver stable net profits moving forward. M1’s dividend yield of 5.3% continues to remains attractive at current prices. We maintain our “Neutral” rating, with an unchanged TP of S$2.41.

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