Month: October 2009
M1 – BT
M1’s Q3 profit down 0.7% to $34.2m
Customers continue to rein in cell phone usage and overseas calls amid uncertain outlook
MOBILEONE’S net profit slipped marginally in the third quarter as consumers continue to rein in cell phone usage and overseas calls amid the uncertain economic outlook.
Net income for the three months ended Sept 30 was $34.2 million, down 0.7 per cent from $34.4 million a year back.
Earnings per share were flat at 3.8 cents, while revenue fell 4.2 per cent to $188.4 million, from $196.7 million in the previous corresponding period.
‘General economic sentiment improved in the third quarter but operating conditions still remain challenging, without a firm or sustainable rebound in spending. Near-term operating revenue will therefore remain under pressure,’ M1 CEO Karen Kooi said in a statement yesterday.
Singapore’s smallest telco continues to see weakness across its two main business lines, as customers keep within their subscription bundles and refrain from making overseas calls.
Mobile revenue slid 5.6 per cent to $140.8 million in Q3. The decline was higher among post-paid subscribers, with sales from this customer segment falling 5.9 per cent to $122.7 million. Pre-paid revenue declined 3.6 per cent to $18.1 million.
M1 added 11,000 post-paid customers and 86,000 pre-paid subscribers in Q3 to lift its user base to 1.72 million.
Revenue from international call services fell 1.6 per cent to $31.8 million during the quarter, while fixed network sales were $600,000.
This is the first time M1 has incorporated revenue from its fixed network business into its earnings scorecard, after its foray into consumer broadband in August 2008.
M1 is now tapping on StarHub’s cable infrastructure to provide Internet connectivity, but this could change when Singapore’s new fibre-optic broadband highway becomes partly operational in 2010.
‘The fixed-line services should also pick up momentum with the commercial launch of the Next Generation National Broadband Network next year,’ Ms Kooi noted.
Besides fixed-line broadband, M1 hopes its mobile fortunes could benefit from the iPhone later this year.
On Tuesday, M1 became the second local telco to be given a bite at Apple’s coveted touch-screen handset, breaking Singapore Telecom’s year-long stranglehold on the device.
M1’s iPhone launch date and pricing have not been disclosed.
‘We see exciting opportunities in the upcoming launch of the iPhone,’ Ms Kooi said. ‘We will continue to launch new mobile services and grow our fixed-line business to drive topline revenue growth.’
For the first nine months of this year M1’s net profit was down 0.3 per cent to $113.1 million on a 6.7 per cent drop in revenue to $565.3 million.
The company expects profit after tax for the full year to be comparable to that last year – around $150.1 million.
M1 shares closed 1.6 per cent lower at $1.85 yesterday before the company’s Q3 earnings were released.
STEng – CIMB
Contract win for VT Miltope
VT Miltope wins US$500m contract
Maintain Underperform; upgrade target price from S$2.38 to S$2.78. ST Engineering’s land system subsidiary, VT Miltope, in the US announced that it has secured a 5-year Indefinite Delivery Indefinite Quantity contract worth US$500m to supply rugged laptops, test equipment and instruments to the US army. We raise our earnings estimates by 1% for FY10-11 to incorporate the contract. Our revised target price is still based on blended valuation as we upgrade our earnings, roll forward to end-CY10 and adopt a higher P/E of 17x (previously 11x on SARS valuation) in view of a recovery of the global economy. However, we continue to see limited catalysts for a re-rating of the stock given a muted outlook for the global aviation sector.
VT Miltope to perform 70% of the US$500m contract. The 5-year contract was awarded by the Test, Measurement and Diagnostic Equipment Product Directorate of the US Army. The US Army has the flexibility to take delivery of the AT Platform Automatic Test Systems Maintenance Support Device – Version 3 (MSD-V3) comprising rugged laptops, test equipment and instruments over five years from 2010 to 2014. Some 70% of the contract will be carried out by VT Miltope and 30% by its subcontractor, Science and Engineering Services Inc. We estimate VT Miltope’s share of the contract at US$350m (S$495m).
Estimated S$100m of annual revenue. Assuming that the programme is evenly rolled out over five years, we estimate S$100m of revenue or S$4m of net profit for the group each year. Our earnings estimates have been upgraded by 1% for FY10-11 accordingly.
Valuation and recommendation
Maintain Underperform. ST Engineering is trading at 17x CY10 and 16x CY11 P/Es, close to its 5-year historical average (17x). Although it offers decent yields of 5-6%, we continue to see limited stock catalysts in the absence of a strong pick-up in the aviation sector in the short term. However, we upgrade our target price from S$2.38 to S$2.78 as we upgrade our earnings, roll forward to end-CY10 and apply a higher P/E
of 17x (previously 11x on SARS valuation) in our blended valuation.
STEng – DBS
Poised for re-rating
• Wins S$710m 5-yr contract from US Army
• Land Systems will drive revenue growth in FY10, Aerospace expected to recover
• Upgrade to BUY, TP revised up to S$3.10
• FY09 dividend yield of 5% will provide support
Sizeable contract win. ST Engineering’s US-based Land Systems subsidiary, VT Miltope, has won a 5-year US$500m (~S$710m) contract to supply automatic test systems to the US Army. The 5-year Indefinite Delivery Indefinite Quantity (IDIQ) contract will allow the US Army the flexibility to acquire items like rugged laptops, test equipment and instruments, within stated limits.
Land Systems will drive revenue growth. The announcement takes the value of new contract wins announced in 2H09 to more than S$1.1bn, and comes on top of its existing S$10.7bn orderbook as of end-
2Q09. Along with the expected commencement of deliveries of the Bronco All Terrain Carriers to the UK Ministry of Defence from end-2009, this contract will further boost the performance of the Land Systems
sector in FY10 and FY11. The Aerospace segment will be the other key earnings driver in FY10, with margin recovery on track, as PTF conversions turn profitable. We have revised up our FY10 EPS estimates by about 2.6%.
Laggard for too long. The stock has underperformed the STI by 32% since April’09, and current valuation premium to STI Index of less than 10% is much lower than historical average PE premium of 40%. We believe this narrowing is unsustainable – given STE’s superior cash flow generation, defensive earnings base and 100% dividend payout record – and upgrade the stock to BUY at a revised TP of S$3.10 (20x FY10 earnings, compared to STI trading at 15x FY10). Dividend yield is a healthy 5.0% and further catalyst may be in the form of M&A funded by its recent medium term notes issuance.
STEng – BT
ST Engg wins US$500m US Army contract
It’ll supply laptops, test equipment and instruments
ST Engineering has won a US$500 million contract to supply rugged laptops, test equipment and instruments to the US Army.
The five-year ‘indefinite delivery indefinite quantity’ contract gives the US Army the flexibility to acquire the items, known as At Platform Automatic Test Systems (APATS) Maintenance Support Device – Version 3 (MSD-V3) system, within stated limits.
ST Engineering’s US subsidiary VT Miltope will supply 70 per cent of the programme, with a subcontractor supplying the remainder.
The MSD-V3 is based on the TSC V3-GM45 rugged convertible laptop computer, the next generation of its TSC-750 computer, the company said.
VS Miltope, which makes the rugged computers, has been supplying its products to the US military for years. Over 20,000 units were deployed with US troops in Iraq earlier this decade. The computers are also supplied to the US Air Force, but the new contract is likely to be the biggest yet.
The militarised laptop is designed and qualified to withstand the harshest tactical environment for computer systems and is being used in forward areas under extreme weather and handling conditions.
The contract is not expected to have any material impact on the consolidated net tangible assets per share and earnings per share of ST Engineering for the current financial year.
ST Engineering has had recent successes in foreign military contracts.
Last year, it secured a breakthrough £pounds;150 million (S$339 million) deal with the British army to supply over 100 armoured vehicles for use in Afghanistan.
Its land systems arm in July won a US$11 million deal to supply asphalt paving equipment to the US Army, the first defence sale for VT LeeBoy, an ST Engineering unit which is a leading manufacturer of commercial-class asphalt pavers.
The company has also secured multiple contracts supplying ammunition to foreign military forces, most recently a £pounds;2.8 million contract to supply 40mm ammunition to the UK Ministry of Defence, which it has done since 2002.
Yesterday, the company’s aerospace arm was awarded a Defence Industry Award of Excellence by the Defence Industry Committee of New Zealand (DICNZ) for its development of a multi-role combination solution for two Boeing 757-200 aircraft for the Royal New Zealand Air Force (RNZAF).
The second of the two converted aircraft was successfully redelivered this year with enhanced capabilities to RNZAF, and both are now operational, the company said.
STEng – CNA
ST Engineering unit wins US$500m contract from US Army
ST Engineering said on Thursday that its unit, VT Miltope, has won a US$500 million contract to supply a maintenance support device system to the US army.
VT Miltope specialises in the design, development and production of rugged computers, servers and related peripherals that can operate in the most demanding environmental conditions.
The company will provide the US army with an “At Platform Automatic Test” systems maintenance support device.
The contract is not expected to have any material impact on ST Engineering’s assets and earnings for the current financial year.
– CNA/sc