Author: kktan
M1 – OCBC
FY12 RESULTS MOSTLY IN LINE
- Higher-than-expected tax expense
- Guides for moderate earnings growth
- Keeps minimum 80% payout ratio
Special dividend of 1.7 cents
M1 Ltd reported its 4Q12 results last evening. While revenue of S$327.4m (+3.2% YoY, +28.5% QoQ) was 5.0% ahead of our forecast, aided by higher handset sales of the new iPhone 5 and new Samsung Note 2, net profit of S$37.9m (flat YoY, +14.5% QoQ) was 11.7% below our estimate. This was mainly due to higher-than expected tax expense of S$11.8m (+78.8% YoY. +63.9% QoQ) arising from prior years’ under-provision of deferred taxation. For FY12, revenue came in at S$1076.8m, or 1.5% above our number, while net profit of S$146.5m was 3.3% below. M1 declared a final dividend of S$0.063/share and a special dividend of S$0.017/share, bringing the total full-year dividend to S$0.146 (versus S$0.145).
Expects moderate earnings growth in 2013
Going forward, management expects to see moderate earnings growth in 2013, aided by continued strong take-up of 4G services, where it already has 146k 4G subscribers as of end-2012, thanks to its faster 4G roll-out across the island compared to its peers; uplift from its new tiered pricing plans. Management also cites a likely acceleration of fiber adoption as a driver as margin will improve with scale – M1 currently has close to 52k NBN customers as of end 2012; company believes that it can hit optimal efficiency with 100k users. Meanwhile, M1 will spend some S$130-150m capex to expand its mobile coverage and capacity (partly due to new QoS imposed by IDA). It also maintains a minimum 80% dividend payout ratio.
Maintain BUY with S$2.89
We are paring our FY13 earnings forecast by 9% after taking the guidance into consideration. But as we shift our DCF valuations out to 2015, our fair value remains unchanged at S$2.89. Maintain BUY as we still believes M1 has potential gain market share in the NBN segment.
TELCOs – CIMB
Previewing 4Q12
StarHub’s FY12 earnings could surprise positively while that of M1 is likely to be in line. More importantly, we expect StarHub to raise its quarterly dividend from 5 Scts to 6 Scts given its multi-year low gearing and lower capex in FY13.
Both telcos should see 4Q12 net profit weaken qoq due to seasonally-higher subscriber acquisition costs but that of StarHub should only be a little lower due to better bulk discount of devices. No change to our estimates for M1 and StarHub and our Neutral stand on the sector as it lacks rerating catalysts. StarHub (Outperform) is our top pick given a higher dividend. We will preview SingTel separately.
Higher SAC in 4Q12
Key themes for the 4Q12 results are: 1) competition in 4Q12 was fairly rational and did not stray beyond the bounds of seasonality, based on our industry checks. However, the hotspot of competition remained fixed broadband, 2) EBITDA margins are expected to come under pressure owing to higher subscriber acquisition costs (SACs) in relation to festive promotions and the full impact of subsidies for the iPhone 5, and 3) revenue is estimated to be higher given data monetisation and seasonality.
4Q12 expectations for M1
We expect M1’s FY12 core net profit to be line with both our and consensus estimates. However, a big swing factor is the composition of iPhones vs. non-iPhone devices as accounting for the former is based on fair value and has little impact on quarterly earnings whereas the latter does. 4Q12 service revenue should have improved qoq due to revenue contribution from subs growth in 3Q and revision of data prices. M1 is expected to release results on 21 Jan.
StarHub could surprise positively
StarHub’s FY12 core net profit could surprise the market by 4% but come within our forecast. The telco hinted that its EBITDA margin could exceed its guidance of 30% due to lower SACs as it has secured better bulk pricing for handsets and other devices. More importantly, we expect StarHub to raise its quarterly dividends from 5 Scts to 6 Scts. The company will release its results on 7 Feb.
TELCOs – CIMB
Previewing 4Q12
StarHub’s FY12 earnings could surprise positively while that of M1 is likely to be in line. More importantly, we expect StarHub to raise its quarterly dividend from 5 Scts to 6 Scts given its multi-year low gearing and lower capex in FY13.
Both telcos should see 4Q12 net profit weaken qoq due to seasonally-higher subscriber acquisition costs but that of StarHub should only be a little lower due to better bulk discount of devices. No change to our estimates for M1 and StarHub and our Neutral stand on the sector as it lacks rerating catalysts. StarHub (Outperform) is our top pick given a higher dividend. We will preview SingTel separately.
Higher SAC in 4Q12
Key themes for the 4Q12 results are: 1) competition in 4Q12 was fairly rational and did not stray beyond the bounds of seasonality, based on our industry checks. However, the hotspot of competition remained fixed broadband, 2) EBITDA margins are expected to come under pressure owing to higher subscriber acquisition costs (SACs) in relation to festive promotions and the full impact of subsidies for the iPhone 5, and 3) revenue is estimated to be higher given data monetisation and seasonality.
4Q12 expectations for M1
We expect M1’s FY12 core net profit to be line with both our and consensus estimates. However, a big swing factor is the composition of iPhones vs. non-iPhone devices as accounting for the former is based on fair value and has little impact on quarterly earnings whereas the latter does. 4Q12 service revenue should have improved qoq due to revenue contribution from subs growth in 3Q and revision of data prices. M1 is expected to release results on 21 Jan.
StarHub could surprise positively
StarHub’s FY12 core net profit could surprise the market by 4% but come within our forecast. The telco hinted that its EBITDA margin could exceed its guidance of 30% due to lower SACs as it has secured better bulk pricing for handsets and other devices. More importantly, we expect StarHub to raise its quarterly dividends from 5 Scts to 6 Scts. The company will release its results on 7 Feb.
RafflesMed – OCBC
DOWNGRADE TO HOLD; TONING DOWN ASSUMPTIONS
- Uncertainty over new Specialist Centre
- Paring FY13F EPS estimate by 5%
- No near-term impact from HK land tender
Delay over new Specialist Centre could shroud earnings visibility
Raffles Medical Group (RMG) is seeking to expand its capacity with a new Specialist Centre at 30 Bideford Road (~42,668 sf). However, we believe that there is still uncertainty over the possible commencement date of operations as the authorities had rejected its first application in Oct last year. We adopt a more conservative approach, and assume that the delay in operations would stretch until late 2013 or early 2014 (previously 1H13). We believe that there could also be a negative flowthrough effect to its Raffles Hospital as this new Specialist Centre was intended to act as an additional platform for referrals for follow-up diagnostic and treatment services. We thus trim our FY13F revenue and EPS estimates by 2.7% and 5.0%, respectively.
Awaiting results of private hospital land tender bid in HK
RMG is currently awaiting the results of its Hong Kong land tender bid for a private hospital development (submitted on 27 Jul 2012), with results expected to be announced in early 2013. Regardless of the outcome of the tender results, we opine that there would be no material near-term financial impact on RMG, given that this is a greenfield project and capex would take place in stages. We expect this project to be financed by RMG’s strong operating cashflow generation and debt.
Downgrade to HOLD on revised estimates and valuation grounds
RMG’s share price has performed commendably since we upgraded the stock to a ‘Buy’ on 10 Oct 2012 (please refer to our report titled “Time to Revisit This Stock”), jumping 18.2% against the STI’s 4.7% gain over the same period. We now downgrade RMG to HOLD, as we lower our fair value estimate from S$2.82 to S$2.68 as a result of our reduced projections, still pegged to 24x FY13F EPS.
RafflesMed – OCBC
DOWNGRADE TO HOLD; TONING DOWN ASSUMPTIONS
- Uncertainty over new Specialist Centre
- Paring FY13F EPS estimate by 5%
- No near-term impact from HK land tender
Delay over new Specialist Centre could shroud earnings visibility
Raffles Medical Group (RMG) is seeking to expand its capacity with a new Specialist Centre at 30 Bideford Road (~42,668 sf). However, we believe that there is still uncertainty over the possible commencement date of operations as the authorities had rejected its first application in Oct last year. We adopt a more conservative approach, and assume that the delay in operations would stretch until late 2013 or early 2014 (previously 1H13). We believe that there could also be a negative flowthrough effect to its Raffles Hospital as this new Specialist Centre was intended to act as an additional platform for referrals for follow-up diagnostic and treatment services. We thus trim our FY13F revenue and EPS estimates by 2.7% and 5.0%, respectively.
Awaiting results of private hospital land tender bid in HK
RMG is currently awaiting the results of its Hong Kong land tender bid for a private hospital development (submitted on 27 Jul 2012), with results expected to be announced in early 2013. Regardless of the outcome of the tender results, we opine that there would be no material near-term financial impact on RMG, given that this is a greenfield project and capex would take place in stages. We expect this project to be financed by RMG’s strong operating cashflow generation and debt.
Downgrade to HOLD on revised estimates and valuation grounds
RMG’s share price has performed commendably since we upgraded the stock to a ‘Buy’ on 10 Oct 2012 (please refer to our report titled “Time to Revisit This Stock”), jumping 18.2% against the STI’s 4.7% gain over the same period. We now downgrade RMG to HOLD, as we lower our fair value estimate from S$2.82 to S$2.68 as a result of our reduced projections, still pegged to 24x FY13F EPS.