M1 – MayBank Kim Eng

Dishing out special dividends

  • M1 declared a special dividend of 7.1 cents for FY13, as expected. Including the final dividend of another 7.1 cents, it will pay out 120% of its FY13 profit.
  • In our view, there could be more special dividend payouts to come as we expect free cash flow to remain strong this year and capex to decline next year.
  • Maintain BUY. TP is lowered slightly to SGD3.86 as we factor in lower growth forecasts for fibre revenue that will slightly offset strong growth in data usage.


What’s New

M1’s FY13 net profit of SGD160m was slightly below our expectations of SGD169m, mainly due to lower-than-expected fibre revenue. But the telco delivered on the one thing we had anticipated the most – an additional substantial payout to shareholders. It declared a special dividend of 7.1 cents a share for FY13, equalling the final dividend of 7.1 cents a share. Taking advantage of its strong balance sheet, with a net debt/EBITDA ratio of just 0.6x, M1 will be paying out 120% of its FY13 net profit in total.

What’s Our View

We lower our target price slightly to SGD3.86 as we scale back our FY14E-16E forecasts on lower expectations for the fibre business. However, we think there is potential for M1 to further return cash to shareholders this year. Its free cash flow should remain strong in FY14E and guidance for lower capex in FY15E indicates that net debt/EBITDA will stay low at 0.6-0.7x for this year and the next. We maintain our BUY call on M1, which stays as our top Singapore telco pick.

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