Monday, July 22, 2013

M1 2Q13: Android Phones Hit Earnings But Attractive Dividends (UOBKH)

M1 (M1 SP)
Share Price S$3.12
Target Price S$3.58
2Q13: Android Phones Hit Earnings But Attractive Dividends

M1 achieved strong growth in its mobile and fibre broadband businesses. Unfortunately, bottom line was affected by higher handset costs due to a shift towards Android-based smartphones. M1 remains our preferred pick for the telco sector due to its attractive valuation and sustainable dividend policy. Maintain BUY but lower target price to S$3.58.

Results
• M1 reported net profit of S$39.2m for 2Q13 (+11.2% yoy), slightly below our expectations.


• Growth in mobile. M1 added 9,000 post-paid customers and grew postpaid subscriber base by 4.9% yoy, maintaining its market share. Postpaid ARPU increased 2% qoq to S$62.30 driven by adoption of tiered data plans. 26% of its post-paid subscriber base has migrated to tiered data plans, of which 15% exceeded their data bundle.

• Samsung S4 was launched in Apr 13, which caused a shift in the mix of handsets towards Android-based smartphones. 75% of handsets were Android-based in 2Q13 compared to only 50% in 1Q13. Costs of handset for Android-based smartphones were expensed off in entirety, resulting in a 4% qoq increase in costs of handsets. Thus, EBITDA margin contracted from 39.5% in 1Q13 to 37.1% in 2Q13.

• Continuing to expand fibre broadband. M1 added 7,000 fibre broadband customers to expand subscriber base to 67,000 in 2Q13. ARPU for fibre broadband was relatively stable at S$47.30.

• Lower gearing. M1’s net debt/EBITDA was only 0.6x in 2Q13 compared to 0.9x last year. It generated free cash flow of S$59m in 2Q13, slightly higher than S$55m in 1Q13.

• M1 declared an interim dividend of 6.8 S cents/share, representing a payout ratio of 78%.

Stock Impact
• Anticipates moderate growth. Management guided moderate growth in earnings for 2013. Capex is expected to be S$130m, at the lower end of its previous guided range. M1 will invest S$85m to modernise its 3G network, including deploying a nation-wide 3G radio network on 900MHz frequency that enhances both indoor and outdoor coverage.

• Upcoming iPhone 6. Industry talk has it that the new iPhone 6 could be powered by a quad-core A7 and features iOS 7, which is a radical overhaul of the operating system. It provides gesture control, possibly including eye-tracking technologies. It comes with a Retina+ Sharp IGZO display with 1080-pixel full HD resolution. It has a 13-megapixel digital camera but will not have any home button.

• Apple is expected to provide iPhone 6 in various form factors, including 4.7-inch and 5.7-inch versions. Industry talk also has it that Apple will offer an updated iPhone 5S, followed by a brand new iPhone 6.

• Prospects for improvement in margins. M1 expects adoption of fibre broadband to accelerate in 2013. Management expects margins to improve as it approaches a critical scale of 100,000 subscribers.

Earnings Revision/Risk
• We have reduced our 2013 and 2014 net profit forecasts by 4% and 1.2% respectively due to higher costs of handsets with the shift in mix of handsets towards Android-based devices and higher traffic expenses for international call services.

Valuation/Recommendation
• Our target price for M1 is S$3.58 based on DCF (required rate of return: 6.7%, terminal growth: 1.0%). Maintain BUY.

Share Price Catalyst
• Attractive dividend yield of 4.5%. Regular special dividend anticipated albeit at a smaller quantum.

• Continued addition of subscribers for fibre broadband services. Expansion of margins as base of subscribers reaches critical scale.



Source/Extract/Excerpts/来源/转贴/摘录: UOB Kay Hian research
Publish date: 17/07/13

No comments:

Post a Comment

Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
吉姆·罗杰斯(Jim Rogers)
“错过时机”胜于“搞错对象”:不会全军覆没!”
做自己熟悉的事,等到发现大好机会才投钱下去

乔治·索罗斯(George Soros)

“犯错误并没有什么好羞耻的,只有知错不改才是耻辱。”

如果操作过量,即使对市场判断正确,仍会一败涂地。

李驰(中国巴菲特)
高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo


There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
冷眼(冯时能)投资概念
“买股票就是买公司的股份,买股份就是与陌生人合股做生意”。
合股做生意,则公司股份的业绩高于一切,而股票的价值决定于盈利。
价值是本,价格是末,故公司比股市重要百倍。
曹仁超-香港股神/港股明灯
1.有智慧,不如趁势
2.止损不止盈
成功者所以成功,是因为不怕失败!失败者所以失败,是失败后不再尝试!
曾淵滄-散户明灯
每逢灾难就是机会,而是在灾难发生时贱价买股票,然后放在一边,耐性地等灾难结束
  • Selected Indexes 52 week range

  • Margin of Safety

    Investment Clock

    World's First Interactive Investment Clock