Author: kktan
M1 – BT
M1 posts 4.1% rise in Q3 profit to $41.1m
Lower operating expenses, lower cost of sales lift earnings
M1 Limited’s third-quarter operating revenue dipped 0.4 per cent to $244.8 million, from $245.7 million a year ago, as weaker handset sales weighed on the topline.
However, net profit for the three months ended Sept 30 climbed 4.1 per cent to $41.1 million from $39.5 million in the prior year.
Earnings per share for the quarter rose 2.3 per cent to 4.5 cents, from 4.4 cents a year earlier.
Lower operating expenses, helped by lower cost of sales, were the key driver in the mobile provider’s higher earnings.
Net margin for the quarter increased 0.7 of a percentage point to 16.8 per cent from 16.1 per cent for the corresponding period last year.
Cost of sales fell 4.7 per cent year-on-year to $118.0 million on the back of lower handset costs, whilst a drop in operating expenses was helped by lower advertising and administrative costs and lower general and administrative expenses.
The smallest local operator also turned in a better report card for two of its three business lines in the third quarter.
Notably, revenue from mobile services, which accounts for more than half of the group’s revenue, grew 2.5 per cent to $147.5 million.
Surging 77.0 per cent, sales from M1’s fixed services segment – its nascent broadband business – broke into the double-digit range, raking in a total of $10.8 million in 3Q11 from $6.1 million in 3Q10.
On the downside, M1’s business segment, internal call services, saw a 5.3 per cent dip in revenue to $30.3 million for 3Q11 due to weaker retail takings.
Handset sales for the season was also 11.6 per cent weaker year-on-year at $56.3 million as compared to $63.7 million in 3Q10 on the back of lower unit selling prices.
On a year-to-date basis, M1’s operating revenue for the nine months ended Sept 30, 2011, went up 4.2 per cent at $747.8 million on the back of higher service revenue and handset sales. Net profit for the first nine months also came in 5.7 per cent higher year-on-year at $126.4 million.
Last month, M1 launched its own active network for the Next Generation Nationwide Broadbank Network (NGNBN) in the hope of lowering its operating cost base.
M1 chief executive officer Karen Kooi shared that this latest initiative would boost M1’s overall service level and competitiveness on top of enhancing its ability to offer customised solutions.
‘Based on the current outlook and barring any unforeseen circumstances, net profit after tax for 2011 is likely to improve, compared to 2010,’ said Ms Kooi.
M1 shares closed one cent lower at $2.48 yesterday.
M1 – BT
M1 posts 4.1% rise in Q3 profit to $41.1m
Lower operating expenses, lower cost of sales lift earnings
M1 Limited’s third-quarter operating revenue dipped 0.4 per cent to $244.8 million, from $245.7 million a year ago, as weaker handset sales weighed on the topline.
However, net profit for the three months ended Sept 30 climbed 4.1 per cent to $41.1 million from $39.5 million in the prior year.
Earnings per share for the quarter rose 2.3 per cent to 4.5 cents, from 4.4 cents a year earlier.
Lower operating expenses, helped by lower cost of sales, were the key driver in the mobile provider’s higher earnings.
Net margin for the quarter increased 0.7 of a percentage point to 16.8 per cent from 16.1 per cent for the corresponding period last year.
Cost of sales fell 4.7 per cent year-on-year to $118.0 million on the back of lower handset costs, whilst a drop in operating expenses was helped by lower advertising and administrative costs and lower general and administrative expenses.
The smallest local operator also turned in a better report card for two of its three business lines in the third quarter.
Notably, revenue from mobile services, which accounts for more than half of the group’s revenue, grew 2.5 per cent to $147.5 million.
Surging 77.0 per cent, sales from M1’s fixed services segment – its nascent broadband business – broke into the double-digit range, raking in a total of $10.8 million in 3Q11 from $6.1 million in 3Q10.
On the downside, M1’s business segment, internal call services, saw a 5.3 per cent dip in revenue to $30.3 million for 3Q11 due to weaker retail takings.
Handset sales for the season was also 11.6 per cent weaker year-on-year at $56.3 million as compared to $63.7 million in 3Q10 on the back of lower unit selling prices.
On a year-to-date basis, M1’s operating revenue for the nine months ended Sept 30, 2011, went up 4.2 per cent at $747.8 million on the back of higher service revenue and handset sales. Net profit for the first nine months also came in 5.7 per cent higher year-on-year at $126.4 million.
Last month, M1 launched its own active network for the Next Generation Nationwide Broadbank Network (NGNBN) in the hope of lowering its operating cost base.
M1 chief executive officer Karen Kooi shared that this latest initiative would boost M1’s overall service level and competitiveness on top of enhancing its ability to offer customised solutions.
‘Based on the current outlook and barring any unforeseen circumstances, net profit after tax for 2011 is likely to improve, compared to 2010,’ said Ms Kooi.
M1 shares closed one cent lower at $2.48 yesterday.
SPH – Lim and Tan
• SPH has cut the special dividend to 8 cents per share. Combined with the unchanged 9 cents final and 7 cents interim, the yield is 6.3%.
• While understandable (dividend for the year of $386 mln already represents close to 100% payout), it is disappointing, considering that the $109.3 mln profit decline to $388.6 mln* for ye Aug ’11 because of the absence of property development profit is long known (profit from Sky @ Eleven, which totaled $154.2 mln for ye Aug ’10, ceased from Q4), and management had kept the interim dividend for half year ended Feb ’11 unchanged at 7 cents.
* Recurrent earnings effectively improved by $24 mln / 6.3% to $409.0 mln, especially in Q4 when it came to $103.6 mln vs $75.4 mln year before.
• We maintain SPH’s board should commit to a clear dividend policy, given the monopoly of the newspaper business.
• Still, the 6.3% yield should continue to provide good cushion to SPH’s share price.
• BUY especially if the stock should react negatively to the dividend cut.
SPH – Lim and Tan
• SPH has cut the special dividend to 8 cents per share. Combined with the unchanged 9 cents final and 7 cents interim, the yield is 6.3%.
• While understandable (dividend for the year of $386 mln already represents close to 100% payout), it is disappointing, considering that the $109.3 mln profit decline to $388.6 mln* for ye Aug ’11 because of the absence of property development profit is long known (profit from Sky @ Eleven, which totaled $154.2 mln for ye Aug ’10, ceased from Q4), and management had kept the interim dividend for half year ended Feb ’11 unchanged at 7 cents.
* Recurrent earnings effectively improved by $24 mln / 6.3% to $409.0 mln, especially in Q4 when it came to $103.6 mln vs $75.4 mln year before.
• We maintain SPH’s board should commit to a clear dividend policy, given the monopoly of the newspaper business.
• Still, the 6.3% yield should continue to provide good cushion to SPH’s share price.
• BUY especially if the stock should react negatively to the dividend cut.
SPH – CIMB
Downside risks
While SPH’s 6% yields are fairly attractive, we see downside with streetyet to factor in a sufficient falloff in ad growth momentum and investment income. Balance sheet is however strong, which coupled with recurring cash flows, could prompt us to revisit the stock.
FY11 core profit was in line at 102% of our estimate though final dividend of 17scts beat our expectations on a higher payout. We are however lowering our EPS estimates on reduced ad revenue forecast and investment income. Coupled with lower property valuations, we lower our sum-of-parts target price to S$3.90 from S$4.24. Maintain Neutral.
Falloff in ad growth momentum imminent
While print revenue chalked up a modest 5.7% yoy growth in FY11 on stronger display ad sales, we see downside for growth momentum next year amidst a slowing domestic economy. Print revenue fell by 17% in the last downturn. With slowdown in economic growth next year, we moderate our FY12 print revenue growth estimate to +2%.
Reprieve from moderating cost pressures
Cost pressures could alleviate, given a variable performance component in staff cost and a moderation in newsprint costs (spot: US$680/MT). These could offer some reprieve should top-line growth fall.
Risks from investment portfolio
FY11 earnings were propped up partly by a 28% increase in investment income. With equities (mainly M1 and Starhub holdings) and investment funds (some S-REIT holdings) accounting for 33% and 25% of its investible funds, downside risks could prevail on a deep market correction.
Revisit at lower valuations
While dividend yields of 6% are fairly attractive, we see downside in ad growth, investment and property portfolio. We are lowering our valuations of Paragon and Clementi Mall. Balance sheet is however strong, which coupled with recurring cash flows, could prompt us to revisit the stock at lower valuations.