Author: tfwee
M1 – Phillip
Q2 FY08 results are within expectations
Net profit increased slightly in Q2. For Q2 FY08, M1 reported operating revenue of S$205.3m (+2.8% yoy), profit before tax of S$50.8m (+0.8% yoy) and net profit of S$41.1m (+1.2% yoy).
The increase in revenue was due to service revenue growth as the customer base increased by 57,000 from the last quarter to 1,611,000. Postpaid and prepaid revenue increased 2.8% and 19.0% to S$271.5m and S$35.1m respectively. Moreover, international call revenue rose 15.1% to S$71.7m.
Outlook for FY08. M1 expects the operations for 2008 to remain stable. The introduction of full mobile number portability from 13 June 2008 resulted in an increase in competitive activities. Thus, M1 saw increases in both its acquisition and retention costs. Nevertheless, it expects competitive activities to settle down in a quarter or two.
The City Telecom-M1-StarHub consortium has jointly submitted a bid to design, build and operate the passive infrastructure layer for the Next Generation National Broadband Network (NBN). The Infocomm Development Authority is expected to announce the winner of the bid in Q3 FY08.
Maintain Hold with fair value at S$2.16. Based on our valuation using the free cash flow to firm model, the target price is maintained at S$2.16. M1 remains a hold as the growth in revenues and profits are likely to be limited due to its focus on the domestic market.
SMRT – DBS
Cost concerns linger
• Within expectations. 1QFY09 net profit of S$40.3m (+6.2% yoy) was within annualised market consensus and our forecast of S$160m, contributing 25% of our full-year estimate. Revenue growth of 11.2% yoy to S$215.9m was slightly ahead of our expectations, mainly driven by higher train ridership and rental income.
• Higher operating expenses. Operating expenses rose 15.7% yoy to S$135m on higher energy costs (+36.2% yoy) and other expenses (+21.1% yoy). Within energy, diesel costs rose 72.3% yoy to S$15.9m, while electricity costs rose 9.5% yoy to S$13.7m. Despite a bigger headcount in preparation for the opening of the Circle Line Stage 3 in mid-2009, staff costs were relatively contained (+7.8% yoy) while depreciation expenses dipped 0.7% yoy. Management expressed concern about sustained high energy costs, especially diesel, and may take the opportunity to hedge should prices fall in the near and medium term.
• Operational review. Revenue from train and bus operations increased on higher ridership, as high petrol prices and ERP charges forced more private car owners into taking public transport. Operating profit margins improved for all except bus operations, which were hit by higher diesel costs. As a result, bus operations lost S$3.3m at the operating level, vs. a S$0.5m profit a year ago. Growth drivers were mainly trains and rentals. Net lettable space rose 13.8% yoy to 26,264 sq m with an average 99.1% occupancy.
• Outlook. We expect SMRT’s topline to improve further on higher train and bus ridership with increased frequencies as marginal private car owners switch to more affordable public transport. However, energy costs should remain a challenge, despite the prospect of a fare hike in 4QCY08.
• Maintain Underperform. We have adjusted our FY09-10 earnings forecasts by – 1.5% to 1.1% to reflect improved ridership as well as higher energy costs, the cost of increased frequencies for trains and higher capex assumptions, which we had earlier underestimated. As a result, our DCF target price drops from S$1.93 to S$1.81 (unchanged WACC 9.3%; terminal growth 2%). Maintain Underperform.
SMRT – DBS
1Q09 results in line
Comment on Results
SMRT’s 1Q09 earnings were in line with expectations. The Group’s net profit rose by 6.2% yoy to S$40.3m on revenue growth of 11.2% yoy to S$216m. Revenue growth was primarily driven by MRT business (+8.2% to S$116m), due to higher rider-ship, as well as the rental business (+47% to S$13.8m). Higher operating profit at the MRT division (+9% yoy to S$35m) and Rental business (+51% to S$10.3m) helped offset losses at the bus division (from profit of S$0.5m to loss of S$3.3m) and taxi division (higher losses of S$1.3m compared to S$300k in 1Q08), both of which were affected by higher fuel costs.
Recommendation
Looking ahead, we expect the Group’s core MRT business to continue faring well on firm rider-ship growth, which should help to alleviate the weak performance of the bus and taxi businesses. Higher rental income on increased floor space and improved rental yields should also help to contribute to higher earnings for SMRT. Whilst earnings growth in the immediate term could be flattish as the Circle Line is being readied (Circle Line Stage 3 is expected to commence in mid 2009) and rolled-out, we continue to be positive on the long-term prospects of the Group, on higher rider-ship and greater use of trains as a mode of public transport.
Maintain BUY, TP S$2.00
M1 – BT
M1 to offer iPhone by year-end: CEO
MOBILEONE Ltd (M1), Singapore’s smallest mobile phone operator, will offer Apple Inc’s iPhone in its retail outlets by the end of this year.
‘I think, before the end of the year we will be’ carrying the phones in our stores, chief executive officer Neil Montefiore said yesterday in a Bloomberg Television interview. ‘It will become available in all markets, with all operators.’
M1’s shares rose 2.1 per cent to close at $1.96, the highest in more than a month. Its stock price has risen 3.2 per cent so far this year, against a 16 per cent drop in the broader benchmark Straits Times Index.
Singapore Telecommunications Ltd, the country’s biggest phone company, said in May that it won exclusive rights to distribute the iPhone in the city-state. Chief executive officer Chua Sock Koong said in a shareholders’ meeting yesterday that the timing of the sale of the iPhone will be determined by Apple and a formal release date has not been confirmed.
‘We are very keen to have the iPhone launched in Singapore as soon as possible. Unfortunately, the schedule is controlled by Apple,’ Ms Chua said. ‘But definitely before the end of the year.’
StarHub Ltd, the second-largest mobile operator, said in May that it also expects to offer the handsets by year-end.
M1 on Thursday reported that second-quarter profit rose 1.2 per cent to $41.1 million after winning more customers. That was higher than the $38 million median profit estimate of three analysts surveyed by Bloomberg News. Sales increased 2.8 per cent to $205.3 million.
Mr Montefiore spent more on advertising and promotions to keep customers after a rule change on June 13 allowed users to switch operators and retain their numbers. M1 won 57,000 users during the quarter, compared with 31,000 a year earlier, as it battled to stem defections to its two rivals. — Bloomberg
SingTel – BT
SingTel tempers special dividend expectations
Chairman tells shareholders such payouts can’t be annual affair
SINGAPORE Telecommunications yesterday told shareholders not to expect special dividends every year, pointing out that it would not be special then.
Total dividend for financial year 2007/2008 came to 12.5 cents, following a final dividend of 6.9 cents.
Speaking at SingTel’s 16th annual general meeting, chairman Chumpol NaLamlieng said: ‘It is not the policy of the board to pay a special dividend every year, otherwise it won’t be a special dividend.’
Some 350 shareholders turned up at the NTUC auditorium for SingTel’s AGM, easily one of the largest gatherings for listed companies here. The two-hour long meeting saw a number of issues being brought up, including SingTel’s ongoing legal battle in Indonesia, the pending launch of the iPhone and why there was no special dividend paid for the year ended March 31, 2008.
Mr Chumpol pointed out that SingTel had raised its dividend policy ratio to 45-60 per cent of underlying net profit, from 40-50 per cent previously.
‘In the event, if there are special reasons, the board will consider,’ he said. ‘The last few years of special dividends and share buybacks may have led shareholders to conclude it’s a normal affair but it is not.’
Since 2000, shareholder payout has been boosted in six of the nine years by special dividends and capital reductions.
SingTel chief executive Chua Sock Koong added that special events in the past included compensation from the government for ending its monopoly ahead of schedule and divestments such as Belgian associate Belgacom.
In 2004, SingTel returned a bumper $4.1 billion to shareholders, buoyed by $3.3 billion of divestments in SingPost, Yellow Pages and Belgacom.
When one shareholder asked if SingTel could pay higher normal dividends, Mr Chumpol said: ‘If the income goes up from normal operations, then normal dividend will definitely go up.’
SingTel’s total shareholder payout since 2000 is about $22 billion, or 82 per cent of earnings over the same period.
SingTel has moved up several rungs this year to rank as the world’s No 11 telco with a market capitalisation of US$42.8 billion. Last year, with a market capitalisation of US$34.4 billion, it ranked No 19.
Its stock closed down five cents at $3.53 yesterday.