Friday, July 19, 2013

M1 2Q13A results: Some early benefits from tiered-data plans (CS)

M1 Limited
Maintain OUTPERFORM
Price (16 Jul 13, S$) 3.12
TP (prev. TP S$) 3.60 (3.60)
2Q13A results: Some early benefits from tiered-data plans, usage on the rise


● M1 reported in-line 2Q13 results. Service revenue grew 8.9% YoY, driven by 7.9% YoY growth in mobile service revenue and 35.4% YoY growth in fixed network revenue. This fed through to YoY growth of 6.2% and 11.4% in EBITDA and net profit, respectively, in 2Q13.


● Importantly, M1 highlighted that ~15% of postpaid subscribers on revised tiered-data plan exceeded their bundle (thus generating higher ARPU), and it expected mobile data usage to continue to increase driven by faster networks/devices. Average smartphone data usage grew 28% YoY, reaching ~2.3GB per month in 2Q13A.

● M1 achieved 50.3%, 50.4% and 52.3% of our service revenues, EBITDA and net profit forecasts in 1H13A, and is broadly on track to meet our forecasts. M1 affirmed FY13E guidance for "moderate growth in net profit after tax" but revised capex guidance to ~S$130 mn (from S$130-150 mn), in line with our expectation.

● We maintain our view that Singapore mobile sector is heading in the right direction and M1 could be the key beneficiary of this, given its higher exposure to domestic mobile. Maintain OUTPERFORM.

Mobile revenue grew 7.2% YoY, monetisation improving
M1’s local mobile service revenue increased by 3.9% QoQ and 7.9% YoY, driven by 6.9% YoY growth in postpaid revenues and 15.0% YoY growth in prepaid revenues. On the postpaid side, M1 noted that its growth was driven in part by improvement in mobile data monetisation following the introduction of tiered-data pricing (reported postpaid ARPU increased by 2.0% QoQ to S$62.3/month). As at end Jun-13, circa 26% (~290k) of M1's postpaid customers are on revised data plans compared to ~20% at Mar-13. Importantly, 15% of these group of subscribers (~44k) are exceeding their data bundle and thus are generating ARPU uplift for M1. We note that this ratio was higher than 9% as at the end of Dec-12 and Mar-13, driven by higher data usage, particularly on LTE. These trends, in our view, are encouraging, and could contribute more to M1's growth particularly into FY14E.

On the prepaid side, YoY revenue growth was driven by higher top-up and M1's more aggressive prepaid subscriber acquisition campaign but some recognition of expired prepaid credits also spilled over from prepaid subscriber base clean-up in 1Q13A.

NGNBN subs growth continued, though only at same pace
M1’s fixed network service revenue (7.4% of group service revenue) grew by 7.0% QoQ and 35.4% YoY in 2Q13A, driven by higher Fibre broadband revenues. M1 reported 67k Fibre subscribers at the end of Jun-13, an increase from 60k subscribers as at Mar-13 (i.e., again 7k net adds in 2Q13A, in-line with 7-8k net adds over the past 6 quarters).

EBITDA grew 6.2% YoY as margin declined slightly YoY
M1’s EBITDA margin (on service revenue) declined by 2.4 pp QoQ to 37.1% in 2Q13A, as higher revenue YoY was partly offset by 22.8% YoY growth in staff costs (higher bonus provisions YoY), 61.4% YoY increase in advertising and promotion expenses (new campaign, very low base YoY), 11.5% YoY increase in net subsidy (Galaxy S4), and costs related to NGNBN services. M1 therefore reported 2.5% QoQ decline but 6.2% YoY growth in EBITDA in 2Q13A. This fed through to 4.4% QoQ decline but 11.4% YoY growth in net profit in 2Q13A. M1 declared an interim DPS of 6.8 cents (78% payout, DPS +3% YoY).

On track to meet our forecasts
Relative to our FY13E forecasts, M1 has thus achieved 50.3%, 50.4%, and 52.3% of our service revenues, EBITDA and net profit forecasts, respectively, in 1H13A, and thus is broadly on track to meet our forecasts (2H result usually softer due to higher subsidy from hi-end handset launch and competition into holiday’s season). During the conference call, apart from highlighting good progress on data-tiered pricing, M1 management also noted that it expected mobile data usage to continue to increase due to faster networks/devices and shift in usage from data card (average smartphone data usage reached 2.3GB/month in 2Q13A, compared to 1.8GB in 2Q12A), as well as affirmed FY13E guidance for "moderate growth in net profit after tax" (CSFY13E 4.6%), but revised capex guidance to ~S$130 mn (from S$130-150 mn, CS FY13E S$131 mn). We maintain our view that the Singapore mobile sector is heading in the right direction (more appropriate tier pricing) and that M1 could be the key beneficiary of this, given its relatively higher exposure to the domestic mobile segment. Maintain OUTPERFORM.



Source/Extract/Excerpts/来源/转贴/摘录: Credit Suisse
Publish date: 17/07/13

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