Flattish performance
- 2Q15 EBITDA rose slightly by 1.2% qoq (+0.5 yoy) due to higher margin on essentially flat service revenue growth.
- Core net profit slid 1.7% qoq (+2.3% yoy) due to higher depreciation and net interest expense.
- This was in line, with 1H15 net profit at 49.1%/48.5% of our/consensus FY15 estimates.
- A 1H15 DPS of 7.0 Scts (1H14: 7.0 Scts) was declared, based on 73% payout.
- We keep our EPS forecasts, Hold call and DCF-based target price of S$3.10 (WACC: 7.1%).
- M1 should benefit from last Sep’s postpaid price hikes as subscribers re-contract into the higher-priced plans, growing data usage and its expansion into fixed services. That said, we see M1’s earnings as being most at risk from the likely entry of a fourth mobile operator in mid-2017, due to its largely Singapore mobile-focus.
Flattish growth in mobile service revenue
- Mobile service revenue was flat qoq (-0.8% yoy) in 2Q15 as growth in mobile data (+8.6% qoq) was offset by declines in voice (-6.7% qoq) and SMS (-14.1% qoq).
- Total MOU fell by 2.1% qoq (postpaid: +0.8%, prepaid: -4.9%), while RPM shed 4.7% qoq.
- Postpaid subscribers on tiered plans rose 4% pts qoq to 72% in 2Q15, while those that exceeded their data bundles rose 3% pts qoq to 23%.
- The average data usage was steady qoq at 3.2GB/month (1Q15: 3.2GB, 2Q14: 2.8GB).
- M1 recorded some positive traction in the postpaid segment with stronger net adds (excluding wireless broadband) of 11k in 2Q15 (1Q15: +3k, 4Q14: -3k), while prepaid net adds came in at only 1k.
Fixed services remain on steady growth path
- Fixed services revenue rose 4.1% qoq (+15.5% yoy), driven by steady growth in fibre customers by 6k qoq (+5.6% qoq) to 114k in 2Q15.
- Fibre ARPU also inched up 2.2% qoq, indicating stabilisation in market pricing.
- Meanwhile, for the international call services business, revenue continued to slide by 6.5% qoq (-26.6% yoy) due to lower IDD call traffic to low-margin destinations such as India and Bangladesh.
Higher EBITDA margin qoq
- The EBITDA margin on service revenue rose 0.5% pt qoq (+1.2% pts yoy) to 41.0% in 2Q15, due to lower advertising, bad debts and other general & administrative cost.
- We expect its full-year EBITDA margin to come in at 41.0% (+0.8% pt yoy) and rise further to 42.2% in FY16 and 42.1% in FY17.
(FOONG Choong Chen, CFA)
Source: http://research.itradecimb.com/
