M1 LIMITED
B2F.SI
M1 Limited Results Flash Note Update
- M1’s 1QFY16 revenue/EBITDA are fairly consistent with seasonal trends (off a high base in 4Q15) although we note A&P spending was much lower than the typical run rate.
- Mobile service revenue fell 1.9% Y-o-Y in 1Q16 on protracted weakness in roaming revenue and dilution from SIM-only plans while EBITDA margin was stable yoy at 40.9% with the lower A&P offsetting mobile revenue pressure.
- Higher depreciation expense (+12.1% YoY) however crimped core earnings which fell 6.3% Y-o-Y.
- Overall, core earnings were in line, at 24% of our/consensus forecasts.
- Some highlights :
- SIM- only plans which are APRU dilutive are gaining popularity although M1 did not reveal the percentage of its postpaid base on these plans. In the absence of handset subsidies, the plans should be positive for EBITDA although management was not able to elucidate the impact,
- the new upsized data offers (SGD5.90) introduced in March should help drive more recurring monthly revenues. While headline rates suggest a further dilution in data yields, the offer is confined to recontracting/new subs and not for SIM-only plans,
- there is little clarity on government projects but M1 has been gaining good traction here (Smart Nation related) over the past few quarters and we do not rule out further wins including in the enterprise space (M2M solutions, cloud computing), which would offset the pressure on mobile revenues.
- Fixed services (enterprise) revenue line (10% of overall revenue) sustained its strong double digit Y-o-Y growth trajectory (1Q16: +27%) and remains the bright spot for the company.
- Management has reserved comments on the upcoming spectrum auction pending the release of auction documents.
- We note M1 is assured of at least 5MHz on the 900MHz band (current ownership of 10MHz) as the IDA will set-aside 5MHz for the incumbents. Spectrum payouts are not part of SGD140m in capex guidance which has been reaffirmed with the focus on rolling out more fiber into commercial buildings/enterprises to capitalise on new revenue opportunities.
- We make no change to our BUY rating, forecast and DCF TP (WACC: 8.5%, TG: 1.5%) of SGD3.20.
- Notwithstanding the entry of a new/fourth mobile network operator in 2017 (our nos. have incorporated mid-term ARPU erosion and rising competitive intensity), we see M1 benefiting most when the market comes to realise that the threat posed by the new entrant has been grossly exaggerated. Funding and execution risks remain for the new entrant.
Singapore Research
RHB Invest
|
http://www.rhbinvest.com.sg/
2016-04-14
RHB Invest
SGX Stock
Analyst Report
3.20
Same
3.20
