Singapore Telcos - Maybank Kim Eng 2019-03-29: M1 De-listing ~ Chaos Or Repair?

Singapore Telcos - Maybank Kim Eng Research | SGinvestors.io SINGTEL (SGX:Z74) NETLINK NBN TRUST (SGX:CJLU) STARHUB LTD (SGX:CC3) M1 LIMITED (SGX:B2F)

Singapore Telcos - M1 De-listing: Chaos Or Repair?

Uncertainty still prevails. Stay NEUTRAL

  • With M1 LIMITED (SGX:B2F)’s imminent de-listing (date TBD) the key question now is what are the implications for competition in the industry? In theory, a privately held M1 would have room to be more disruptive. However, the initial indications from Konnectivity’s post VGO disclosure suggested a tilt towards internal business restructuring.
  • Despite the wireless industry de-rating, the overhang remains; we maintain our NEUTRAL sector view.
  • STARHUB (SGX:CC3) provides the best value while NETLINK NBN TRUST (SGX:CJLU) offers insulation from wireless segment uncertainty.



Unveiling plans soon?

  • Konnectivity has broadly disclosed a “multi-year” and “multi-pronged” goal to enhance M1’s competitiveness partly from synergies within the group (see SPH's announcement or Keppel Corp's announcement dated 18-Mar-2019).
  • We believe that initially this could involve a right sizing exercise similar to StarHub on the cost side. Meanwhile, on the revenue side farming more enterprise contracts from the relationships with its two major shareholders could be unlocked. These potential developments would not escalate the current state of competition – a neutral/positive event. We may get more color on M1’s plans during the Keppel Corporation (SGX:BN4) or Singapore Press Holdings (SGX:T39) post results analyst briefings this coming quarter. With this note we drop coverage of M1 given its imminent de-listing.


Are MVNO deals still viable for incumbents?

  • Given that the current state of competition was catalyzed by M1’s launch of the first commercially successful MVNO deal with unlisted Circles.Life, Konnectivity’s views about whether such deals remain relevant are key to the industry’s medium-long term outlook.
  • With the incumbents themselves slugging it out in the cheap data, SIM only segment which used to be MVNO territory, is there still a need for MVNO deals?


De-rated, declining profit, but is it in the price?

  • The wireless telco companies have de-rated with M1’s share price performance salvaged by the VGO. We anticipate earnings declines over the next two years given continued revenue erosion from the wireless segment.
  • We believe that the de-rating reflects a significant amount of risk but the catalysts for a sustainable re-rating will only come after TPG’s commercial launch is revealed and digested. As we noted in our 5G prospects note, 5G could be a differentiator in the long-term but first the pain of capex will have to be realized.





Luis Hilado Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-03-29
SGX Stock Analyst Report HOLD MAINTAIN HOLD 3.390 SAME 3.390
BUY MAINTAIN BUY 0.930 SAME 0.930
BUY MAINTAIN BUY 2.180 SAME 2.180
NOT RATED MAINTAIN SELL 99998 SAME 1.770



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