Author: kktan
M1 – OSK DMG
Still ‘Appletizing’
We maintain BUY on M1, with FV adjusted to SGD4.20 (WACC: 7%, terminal growth: 1.5%) from SGD4.30, a 16% upside. Its re-rating catalysts are: i) continued revenue market share gains, ii) stronger take-up of fiber plans and iii) better data monetisation efforts. The fair value accounting on the iPhone should see M1’s service EBITDA margin bucking the trend in 4Q14, a typically strong quarter for handset sales.
- An indirect ‘beneficiary’ of the iPhone. The overwhelming demand for the recently launched iPhone 6 (IP6) and tight supplies for the larger screen iPhone 6+ (IP6+) in Singapore suggests a likely shift in the Android dominated handset sales mix for 4Q14/1QFY15. This should indirectly benefit M1 as it books upfront revenue from iPhone contracts to partially offset the device subsidy (fair value accounting), which should result in a smaller EBITDA impact vs its larger peers. M1’s EBITDA margin as a percentage of service revenue grew 1-6 ppts q-o-q in 4Q12 and 4Q13 during the launch of the previous iPhone 5 (IP5) and iPhone 5s (IP5s) respectively.
- Firing the latest fiber salvo. M1 recently slashed the price of its 1Gbps fiber plan by 50% to SGD49.00/month, marginally undercutting a similar plan offered by MyRepublic. While there are concerns that the latest move could lead to further value destruction in the fixed broadband space via a fresh round of price competition, we view this as a tactical response to strengthen M1’s triple-play bundling proposition and an attempt to narrow the gap with its larger peers, which are aggressively locking-in customers on multiple services. Being the smallest of the Tier- 1 fiber service provider, M1 stands to gain somewhat from competition with no legacy broadband revenue to cannibalise. Its home-bundling proposition should be catalysed by the implementation of cross-carriage, which should allow pay-TV subscribers to access premium content.
- Data monetisation. We expect M1 to better monetise data going forward with the recent introduction of fresh 4G plans and higher data consumption, resulting in more customers exceeding their bundled data allowances. Subscribers on M1’s previous tiered plans will also likely be subjected to a 4G VAS surcharge after 31 December, providing some average revenue per user (ARPU) uplift.
ComfortDelgro – OCBC
DTL 2 to open ahead of schedule
- Delay in DTL 2 shortened by a few months
- DTL project likely to breakeven earlier
- Maintain BUY
Good news on DTL 2’s schedule
Singapore Transport Minister Lui Tuck Yew announced on 29-Sep that the Downtown Line 2 (DTL 2) mass rapid transit (MRT) line will be opened in 1Q16, a few months ahead of schedule. The original schedule was delayed from end-2015 to mid-2016 after one of its main contractors, Alpine Bau, went into insolvency last year. He added that additional manpower as well as innovative work processes helped accelerate the project and all the contractors will continue to do so in a bid to try to bring forward the opening to even earlier than 1Q16.
Expect DTL project to breakeven earlier
As at 2QFY14, CDG recorded loss of S$6.2m from its Downtown Line 1 (DTL 1) operations but we estimate CDG to breakeven on its start-up costs in the period between phase 2 and phase 3 of the whole DTL project. With the opening of DTL 2 brought forward by a few months and possibly even earlier, we believe this is good for CDG as this would also logically allow it to breakeven earlier as well. Beyond its breakeven point, we expect CDG to be able to cover the licensing fee charged by LTA through revenue generated from DTL and hence see meaningful income contribution. Furthermore, we believe ridership will improve significantly given that the DTL 2 comprises 12 stations and one depot, including four interchange stations, where we expect traffic flow to increase considerably. We also believe the advertisement and rental business segments, which offer higher margins, to further boost revenue and profitability.
Maintain BUY
With the impact of DTL already factored in our financial model previously, we retain our forecasts since the opening of DTL 2 continues to be in FY16. Although the estimated total licensing fee of ~S$1.6b over the 19-year operating lease should have started in 2013 when DTL 1 commenced, we expect to see significant increase only upon opening of the full DTL in 2017 since the
variable component of the fee depends on ridership. With the slight retreat in share price since our last update in Aug-14, we maintain BUY with an unchanged fair value estimate of S$2.92.
September 2014
STI = 3276.74 (-12.98 / -50.35 for the Month)
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
||||
|
Hong Leong Fin |
FY13 (Dec) |
15.85 |
12.00 |
$2.670 |
4.494% |
16.85 |
Interim 4ct ; Final 8ct |
||||
|
SGX |
FY14 (Jun) |
30 |
28 |
$7.230 |
3.873% |
24.10 |
Q1, Q2, Q3 4ct ; Q4 4ct +12ct |
||||
|
SingPost |
FY14 (Mar) |
6.746 |
6.25 |
$1.795 |
3.482% |
26.61 |
Q1, Q2, Q3 1.25ct ; Q4 2.5ct |
||||
|
SPH |
FY13 (Aug) |
27 |
22.0 |
$4.200 |
5.238% |
15.56 |
Interim 7ct ; Final 8ct + Special 7ct |
||||
Note : SGX Added from May-14 ; Q4 Variable Div Depends on FY EPS
Aviation Services
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SATS |
FY14 (Mar) |
16.10 |
13.0 |
$3.060 |
4.248% |
19.01 |
Interim 5ct ; Final 8ct |
|
SIA Engineering |
FY14 (Mar) |
23.88 |
25.0 |
$4.610 |
5.423% |
19.30 |
Interim 7ct ; Final 13ct + Special 5ct |
|
ST Engineering |
FY13 (Dec) |
18.73 |
15.0 |
$3.650 |
4.110% |
19.49 |
Interim 3ct ; Final 4ct + Special 8ct |
Note : SIAEC Special Div is Observed to be Non-Recurring (Depends on Excess Cash)
Transport
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SBSTransit |
FY13 (Dec) |
3.62 |
1.80 |
$1.700 |
1.059% |
46.96 |
Interim 0.9ct ; Final 0.9ct |
|
ComfortDelGro |
FY13 (Dec) |
12.43 |
7.00 |
$2.400 |
2.917% |
19.31 |
Interim 3ct ; Final 4ct |
|
SMRT |
FY14 (Mar) |
4.10 |
2.20 |
$1.550 |
1.419% |
37.80 |
Interim 1.0ct ; Final 1.2ct |
TELCO
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SingTel |
FY14 (Mar) |
22.92 |
16.8 |
$3.800 |
4.421% |
16.58 |
Interim 6.8ct ; Final 10ct |
|
M1 |
FY13 (Dec) |
17.4 |
21 |
$3.560 |
5.899% |
20.46 |
Interim 6.8ct ; Final 7.1ct + Special 7.1ct |
|
StarHub |
FY13 (Dec) |
21.50 |
20 |
$4.120 |
4.854% |
19.16 |
Q1 5ct ; Q2 5ct ; Q3 5ct ; Q4 5ct |
Infrastructure
|
Stock |
Period |
DPS cts |
Mkt |
Yield |
NAV |
Div Breakdown |
|
SPAus |
2H – Mar14 |
A4.18 (Gross) |
$1.510 |
6.251% |
A$0.90 |
1H14 A4.18ct ; 2H14 A4.18ct |
* SPAus DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.1290) fm Yahoo
NOTES :
- Mkt Price is as on 30-Sep-14
- ComfortDelgro : Q214 (Jun) –3.5ct
- ST Engg : 1H14 (Jun) – 4ct
- SBSTransit : Q214 (Jun) – 1.25ct
- HLFin : 1H14 (Jun) – 4ct
- SGX : Q414 (Jun14) – 4ct+ 12ct ; Q314 (Mar14) – 4ct ; Q214 (Dec13) – 4ct ; Q114 (Sep13) – 4ct
- M1 : 1H14 (Jun) – Interim 7ct
- SPAus : FY15 Guidance = A8.36ct Gross
- SPAus : 2H14 (Mar14) – A4.18ct = A1.393ct (Franked) + A2.379ct (Interest – Subject to 10% Tax) + A0.408ct (Capital Returns) ; 1H14 (Sep13) – A4.18ct = A1.393ct (Franked) + A2.396ct (Interest – Subject to 10% Tax) + A0.391ct (Capital Returns)
- SingTel : 2H14 (Mar14) – Interim 10ct ; 1H14 (Sep13) – Interim 6.8ct
- StarHub : Q114 (Mar) – 5ct
- SIAEC : Q414 (Mar14) – Final 13ct + Special 5ct ; Q214 (Sep13) – Interim 7ct
- SMRT : Q414 (Mar14) – Interim 1.2ct ; Q214 (Sep13) – Interim 1ct
- ST Engg : Dividend Payout Reduced from 90% to 80% for FY13 & Will Be Further Reduced to 75% from FY14
- StarHub : FY14 Div Guidance – 5ct/Q
- SingPost : Q314 (Dec13) – 1.25ct ; Q214 (Sep13) – 1.25ct ; Q114 (Jun13) – 1.25ct
- SATSvcs : 1H14 (Sep13) – Interim 5ct
- SPH : 2H13 (Aug) – Final 8ct + Special 7ct ; 1H13 (Feb) – Interim 7ct
SingTel : Div Policy – 60% to 75% of Underlying Net Profit
September 2014
STI = 3276.74 (-12.98 / -50.35 for the Month)
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
||||
|
Hong Leong Fin |
FY13 (Dec) |
15.85 |
12.00 |
$2.670 |
4.494% |
16.85 |
Interim 4ct ; Final 8ct |
||||
|
SGX |
FY14 (Jun) |
30 |
28 |
$7.230 |
3.873% |
24.10 |
Q1, Q2, Q3 4ct ; Q4 4ct +12ct |
||||
|
SingPost |
FY14 (Mar) |
6.746 |
6.25 |
$1.795 |
3.482% |
26.61 |
Q1, Q2, Q3 1.25ct ; Q4 2.5ct |
||||
|
SPH |
FY13 (Aug) |
27 |
22.0 |
$4.200 |
5.238% |
15.56 |
Interim 7ct ; Final 8ct + Special 7ct |
||||
Note : SGX Added from May-14 ; Q4 Variable Div Depends on FY EPS
Aviation Services
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SATS |
FY14 (Mar) |
16.10 |
13.0 |
$3.060 |
4.248% |
19.01 |
Interim 5ct ; Final 8ct |
|
SIA Engineering |
FY14 (Mar) |
23.88 |
25.0 |
$4.610 |
5.423% |
19.30 |
Interim 7ct ; Final 13ct + Special 5ct |
|
ST Engineering |
FY13 (Dec) |
18.73 |
15.0 |
$3.650 |
4.110% |
19.49 |
Interim 3ct ; Final 4ct + Special 8ct |
Note : SIAEC Special Div is Observed to be Non-Recurring (Depends on Excess Cash)
Transport
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SBSTransit |
FY13 (Dec) |
3.62 |
1.80 |
$1.700 |
1.059% |
46.96 |
Interim 0.9ct ; Final 0.9ct |
|
ComfortDelGro |
FY13 (Dec) |
12.43 |
7.00 |
$2.400 |
2.917% |
19.31 |
Interim 3ct ; Final 4ct |
|
SMRT |
FY14 (Mar) |
4.10 |
2.20 |
$1.550 |
1.419% |
37.80 |
Interim 1.0ct ; Final 1.2ct |
TELCO
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SingTel |
FY14 (Mar) |
22.92 |
16.8 |
$3.800 |
4.421% |
16.58 |
Interim 6.8ct ; Final 10ct |
|
M1 |
FY13 (Dec) |
17.4 |
21 |
$3.560 |
5.899% |
20.46 |
Interim 6.8ct ; Final 7.1ct + Special 7.1ct |
|
StarHub |
FY13 (Dec) |
21.50 |
20 |
$4.120 |
4.854% |
19.16 |
Q1 5ct ; Q2 5ct ; Q3 5ct ; Q4 5ct |
Infrastructure
|
Stock |
Period |
DPS cts |
Mkt |
Yield |
NAV |
Div Breakdown |
|
SPAus |
2H – Mar14 |
A4.18 (Gross) |
$1.510 |
6.251% |
A$0.90 |
1H14 A4.18ct ; 2H14 A4.18ct |
* SPAus DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.1290) fm Yahoo
NOTES :
- Mkt Price is as on 30-Sep-14
- ComfortDelgro : Q214 (Jun) –3.5ct
- ST Engg : 1H14 (Jun) – 4ct
- SBSTransit : Q214 (Jun) – 1.25ct
- HLFin : 1H14 (Jun) – 4ct
- SGX : Q414 (Jun14) – 4ct+ 12ct ; Q314 (Mar14) – 4ct ; Q214 (Dec13) – 4ct ; Q114 (Sep13) – 4ct
- M1 : 1H14 (Jun) – Interim 7ct
- SPAus : FY15 Guidance = A8.36ct Gross
- SPAus : 2H14 (Mar14) – A4.18ct = A1.393ct (Franked) + A2.379ct (Interest – Subject to 10% Tax) + A0.408ct (Capital Returns) ; 1H14 (Sep13) – A4.18ct = A1.393ct (Franked) + A2.396ct (Interest – Subject to 10% Tax) + A0.391ct (Capital Returns)
- SingTel : 2H14 (Mar14) – Interim 10ct ; 1H14 (Sep13) – Interim 6.8ct
- StarHub : Q114 (Mar) – 5ct
- SIAEC : Q414 (Mar14) – Final 13ct + Special 5ct ; Q214 (Sep13) – Interim 7ct
- SMRT : Q414 (Mar14) – Interim 1.2ct ; Q214 (Sep13) – Interim 1ct
- ST Engg : Dividend Payout Reduced from 90% to 80% for FY13 & Will Be Further Reduced to 75% from FY14
- StarHub : FY14 Div Guidance – 5ct/Q
- SingPost : Q314 (Dec13) – 1.25ct ; Q214 (Sep13) – 1.25ct ; Q114 (Jun13) – 1.25ct
- SATSvcs : 1H14 (Sep13) – Interim 5ct
- SPH : 2H13 (Aug) – Final 8ct + Special 7ct ; 1H13 (Feb) – Interim 7ct
SingTel : Div Policy – 60% to 75% of Underlying Net Profit
Singpost – CIMB
Groundwork firmly in place
SingPost’s end-to-end ecommerce logistics offering complements its key competitive advantage of being the lowest cost provider, and allows it to tap into a wider customer base. With a good structure firmly in place, the next step would be to replicate its model across the region to expand its network. We keep our Add rating and DCF-based target price of S$1.96 (7% WACC), with the key re-rating catalyst being a potential JV with Alibaba. Apart from
this, M&As in ecommerce logistics will also speed up its regional expansion.
What Happened
SingPost hosted a site tour to view its end-to-end suite of ecommerce logistics services. These range from front-end solutions such as website design to back-end services including warehousing and last-mile delivery.
What We Think
With a full suite of ecommerce logistics solutions, we believe SingPost has laid the groundwork for regional expansion. While most third-party logistics (3PL) providers mainly focus on warehousing and delivery, SingPost’s added services allow it to capture a wider audience, from international brands looking to set up a standalone online retail presence (monobrand channel) to SMEs that want to list their products on an online marketplace (multibrand channel). SingPost views the monobrand segment as a key growth area, given that consumers trust brands’ official websites more than online marketplaces, especially in less ecommerce-ready markets like Indonesia. Moreover, with the exception of website design, the infrastructure and systems needed to run an ecommerce operation for each brand are the same, thus making it highly scalable. As logistics is a volume game, we think that SingPost needs to ramp up order flow to capture efficiency gains and keep its pricing competitive. Order flow is limited by customer acquisitions, which have shown promising signs (doubled from 300 to 600 ecommerce customers as at end-FY14) but still need to expand more rapidly. A potential tie-up with Alibaba could bring in bigger volumes, not only through Alibaba’s expansion into ASEAN, but also a global ecommerce logistics platform that will be made available to third-party users.
What You Should Do
SingPost’s share price has traded sideways since its run-up in Jun when it announced that Alibaba was taking a stake in SingPost. Even the news of a postage rate hike, which we estimate would lead to 6-7% EPS accretion, barely moved its share price. We believe the next re-rating hinges on the potential JV with Alibaba to set up an international ecommerce logistics platform. M&A opportunities in ecommerce logistics also remain a key catalyst for the stock.