MIIF – AmFraser
High-yield TOP pick
• High-yield TOP pick: In our 13 Mar 2012 report titled “The Yield Hunt”, we named MIIF our top high-yield pick with a 9.6% dividend yield, ahead of three other stocks with a history of increasing dividends. We think investing in high-dividend-yield stocks is a way to protect and to grow wealth, particularly in an inflationary and uncertain environment.
• Fund out, funds in: Over the last months, we saw MIIF’s once-largest shareholder Abu Dhabi Investment Authority (ADIA) reduce its stake from 10% to 6% today. We think it is possible that it is looking to exit from this investment entirely, thus putting a near-term cap on MIIF’s share price.
For every seller there is a buyer, and we note that a couple of funds have bought up MIIF in force. These are Asset Value Investors (7.5%) and Long Investment Management Int’l (6.2%); both are value-focused. While we can only speculate on ADIA’s reasons for selling, the strong buying by two separate value-funds is indicative of their private valuations being sufficiently in excess of the market price.
• Another way to value MIIF is to note that management has already valued the three assets using the latest information, a lot of which is private and superior to publicly available data, resulting in an NAV of $0.8123 per share.
From this figure we would subtract the present value of all future expenses, totalling $125m (we have conservatively estimated this figure on the high side), equivalent to $0.1057, for a FV of $0.707, not too different from our DCF FV of $0.691.
• Price supports; dividend yield promotes outperformance. MIIF’s share buybacks are backed by S$110m in cash and a dividend yield in excess of 9%. We note that its share price tracks the market fairly closely (up until the recent outperformance), and the very high yield should ensure outperformance relative to the market each year.
• Focus on underlying value especially from a portfolio perspective: In our eyes, MIIF is a strong dividend play (9.6%) with significant capital gains potential (20%) for a total upside close to 30%. This combination is rather difficult to find elsewhere. The dividend is also likely to increase with asset growth—we forecast the next dividend growth in 2014F. We reiterate our Buy call with an unchanged FV of $0.690.
MIIF – AmFraser
High-yield TOP pick
• High-yield TOP pick: In our 13 Mar 2012 report titled “The Yield Hunt”, we named MIIF our top high-yield pick with a 9.6% dividend yield, ahead of three other stocks with a history of increasing dividends. We think investing in high-dividend-yield stocks is a way to protect and to grow wealth, particularly in an inflationary and uncertain environment.
• Fund out, funds in: Over the last months, we saw MIIF’s once-largest shareholder Abu Dhabi Investment Authority (ADIA) reduce its stake from 10% to 6% today. We think it is possible that it is looking to exit from this investment entirely, thus putting a near-term cap on MIIF’s share price.
For every seller there is a buyer, and we note that a couple of funds have bought up MIIF in force. These are Asset Value Investors (7.5%) and Long Investment Management Int’l (6.2%); both are value-focused. While we can only speculate on ADIA’s reasons for selling, the strong buying by two separate value-funds is indicative of their private valuations being sufficiently in excess of the market price.
• Another way to value MIIF is to note that management has already valued the three assets using the latest information, a lot of which is private and superior to publicly available data, resulting in an NAV of $0.8123 per share.
From this figure we would subtract the present value of all future expenses, totalling $125m (we have conservatively estimated this figure on the high side), equivalent to $0.1057, for a FV of $0.707, not too different from our DCF FV of $0.691.
• Price supports; dividend yield promotes outperformance. MIIF’s share buybacks are backed by S$110m in cash and a dividend yield in excess of 9%. We note that its share price tracks the market fairly closely (up until the recent outperformance), and the very high yield should ensure outperformance relative to the market each year.
• Focus on underlying value especially from a portfolio perspective: In our eyes, MIIF is a strong dividend play (9.6%) with significant capital gains potential (20%) for a total upside close to 30%. This combination is rather difficult to find elsewhere. The dividend is also likely to increase with asset growth—we forecast the next dividend growth in 2014F. We reiterate our Buy call with an unchanged FV of $0.690.
M1 – CIMB
Muted tone
Our recent visit to M1 left our views unchanged. Any re-rating catalysts will depend on improvements relating to LTE and NGNBN, we feel. Take-up of fibre remains slow owing to issues at OpenNet.
The regulator has stepped in to resolve issues such as bureaucracy and installation capacity at OpenNet. Lacking re-rating catalysts, we remain Neutral and keep our DCF target price (WACC 7.9%). Switch to StarHub which has capital-management potential, in our view.
Benign competition, eyeing higher LTE price
There are no competitive hotspots emerging in the mobile space. M1 has stopped offering unlimited mobile broadband to new customers. It has launched LTE services but only to corporate users and then limited to the central business district and industrial areas. M1 plans to raise LTE prices when subscribers expand in 2H12. SingTel also has plans to raise LTE prices when coverage reaches a larger part of the country.
Catalysing NGNBN
Along with the other service providers, M1 has submitted its response to the regulator on the provision of services to NGNBN and is awaiting response from the IDA. Among the matters raised are bureaucratic issues; revision of installation quota, and inconsistent data between OpenNet and access seekers.
Potentially higher capex
M1’s capex could rise on the back of more stringent regulatory requirements for mobile coverage. M1 has not revealed numbers as it is still in dialogue with the regulator on more reasonable coverage terms.
Lacking catalysts
M1 continues to lack re-rating catalysts, in our view. Such catalysts could come from raising data prices, resolving matters with NGNBN, and clarity on its capex from the regulator’s plans to boost service quality. M1 noted a slight improvement in OpenNet’s attitude to resolving issues but much more would need to be done. Switch to StarHub, which is likely to manage capital in the form of a special DPS/capital repayment in 2H12, on top of its attractive recurring 20ct DPS.
M1 – CIMB
Muted tone
Our recent visit to M1 left our views unchanged. Any re-rating catalysts will depend on improvements relating to LTE and NGNBN, we feel. Take-up of fibre remains slow owing to issues at OpenNet.
The regulator has stepped in to resolve issues such as bureaucracy and installation capacity at OpenNet. Lacking re-rating catalysts, we remain Neutral and keep our DCF target price (WACC 7.9%). Switch to StarHub which has capital-management potential, in our view.
Benign competition, eyeing higher LTE price
There are no competitive hotspots emerging in the mobile space. M1 has stopped offering unlimited mobile broadband to new customers. It has launched LTE services but only to corporate users and then limited to the central business district and industrial areas. M1 plans to raise LTE prices when subscribers expand in 2H12. SingTel also has plans to raise LTE prices when coverage reaches a larger part of the country.
Catalysing NGNBN
Along with the other service providers, M1 has submitted its response to the regulator on the provision of services to NGNBN and is awaiting response from the IDA. Among the matters raised are bureaucratic issues; revision of installation quota, and inconsistent data between OpenNet and access seekers.
Potentially higher capex
M1’s capex could rise on the back of more stringent regulatory requirements for mobile coverage. M1 has not revealed numbers as it is still in dialogue with the regulator on more reasonable coverage terms.
Lacking catalysts
M1 continues to lack re-rating catalysts, in our view. Such catalysts could come from raising data prices, resolving matters with NGNBN, and clarity on its capex from the regulator’s plans to boost service quality. M1 noted a slight improvement in OpenNet’s attitude to resolving issues but much more would need to be done. Switch to StarHub, which is likely to manage capital in the form of a special DPS/capital repayment in 2H12, on top of its attractive recurring 20ct DPS.
M1 – Kim Eng
Margin concerns fading
Upgrade to Buy. We expect margin concerns for M1 to fade for a while as the new iPad should not cause a dent, the iPhone 5 launch is unlikely till October 2012 and the telco appears to have shed its previous aggressive stance on fibre, even as the government steps in to smoothen NBN rollout issues. Upgrade to Buy with a target price of $2.85 (including DPS of $0.145) for a total return of 14%.
No adverse margin impact expected from new iPad. When Apple’s new iPad comes onto the market, expected to be available today, we do not expect M1 to suffer a margin upset. The iPad tends to have a much smaller impact on subscriber acquisition costs than the iPhone. In fact, with all the telcos making a concerted break away from unlimited data caps on their new iPad plans (now only 10GB bundled), we are hopeful tablets will play a larger role in boosting data ARPUs.
Easing up on aggressive fibre stance. M1 appears to be easing up on its aggressive stance on fibre. At the recent IT Show 2012, it raised its promotional monthly rate for 100Mbps home fibre broadband from $39 to $45, putting it closer to SingTel’s rate of $49.90 and StarHub’s $49.65. Even so, M1’s rate is still considered attractive vis-à-vis its peers because its price point is lower and it also includes a bundled mobile broadband plan with 5GB data cap.
Enough time for margins to recover. With the new iPad out on the market, the next iPhone (iPhone 5 or just the new iPhone?) is not expected to be launched until October. This is in line with the timing of the iPhone 4S last year, when Apple pushed back the rollout date from a traditional June launch closer to the year-end holiday season. M1’s margins had taken a beating in 4Q11, hence this will give it time – at least two quarters – for its margins to recover.
Fibre to get higher speed limit, positive for M1. The government has finally stepped in to force OpenNet to be more responsive to market needs. As OpenNet works on increasing its permanent installation capacity and comes out with a way to better handle demand fluctuations, we anticipate faster growth in fibre net-adds this year. NGNBN take-up has been slow last year, but if the teething issues are resolved, this will be a positive catalyst for M1.