M1 (formerly: MobileOne)

[specuvestor]

Hi Cityfarmer,

You are right if the assumption made is that an average user consumes 3 gb to 4 gb worth of data. So lets use the current  4 GB SIM only plan as comparison.
What it means for incumbents is that from being able charge $30 for similar 4 GB SIM-only plans, they now are able to charge for only $20. ARPU has fallen. For Starhub and M1 a fall in ARPU by about 30% in mobile, may mean a fall in 15% of overall revenue given how much these 2 telecos have exposure to the mobile segment.

And given how tightly dividends may have to follow revenue/cashflow, I am really interested to see how M1 and Starhub will react to its dividend policy. All in all, I am expecting about a 15% slash in dividends in the medium Term. For starhub, which I monitor rather closely, I wonder how will they maintain their 20 cents dividend when: 1) Mobile makes up 50% of revenue, 2) 2022 bond is maturing and they have not prepared cash buffer.

M1 current yield of  15.3 cents may go lower to 13.5 cents. If so, what is the fair value of M1 in the new normalized teleco environment?
*M1 has about 60% tied to mobile revenue and 30% to handset sales which are tied to recontacting with normal plans instead of SIM-only plans as what we are now using as comparison.

As per my post in Starhub their dividend is highly tied to their operating cashflow. So I would expect their dividend to drop but I won't be worried about their debt. Both Starhub and M1 can repay their debt pretty fast if they just stop dividend

Happy debt holders but not sure about equity holders. I think 10% dividend cut for M1 and Starhub to save ~$20m and ~$35m is about right, and after ~30% fall at 6% yield share prices have adjusted accordingly. Now is the uncertainty discount from the 4th telco.

[CityFarmer]

M1 has actively bought-back shares lately. It might be the newly on-board Chairman initiative, since it never happen in the last few years. I reckon, the buy-back will last for a while.

The update as of today is, treasury shares is 3.8 mil (or 0.4% of outstanding shares).

(vested)

[CityFarmer]

Will you opt for the 10Gbps? I don't need it now. The point is M1, Singtel, SuperInternet and ViewQwest offered it, but Starhub, and MR didn't...

Still early days for 10Gbps fibre
17 Mar 2016 09:00
By Vincent Chang

Heavy Internet users here, especially gamers, online traders and those who crave high-speed connections, got a dramatic boost in the last month.

Four Internet service providers (ISPs) have recently introduced 10Gbps home fibre plans, quintupling the previous top broadband speed for Singapore homes.

At these speeds, users can download an entire 50GB Blu-ray disc in under a minute. Other benefits touted by ISPs include streaming multiple ultra-high-definition 4K videos at the same time without lag and smooth online gaming.

Singtel started the trend last month with a 10Gbps home fibre plan that costs $189 a month.

Currently, M1, Singtel, SuperInternet and ViewQwest offer 10Gbps high-speed fibre plans priced from $189 to $218 monthly with a one- or two-year contract. In comparison, 1Gbps fibre plans start from $39.
...
HARDWARE AND APPS PLAYING CATCH-UP The lack of applications and the need for specialised computers and networking hardware to utilise a 10Gbps connection are reasons cited by MyRepublic and StarHub for not launching 10Gbps fibre plans yet. A spokesman for MyRepublic said that "consumer home connectivity solutions cannot support 10Gbps and will likely remain so for the near future".

Similarly, StarHub said it will expand its fibre broadband offerings when "devices that support higher speeds become affordable for the mass market".
...
Source: Straits Times

[opmi]

Why would regular users need 10 Gbps?

[CityFarmer]

Why would regular users need 10 Gbps?

SOHO setups, which are using only cloud-services?

[Stephen]

Could the massive buybacks by M1 be the precursor of easily divesting M1 away, since the acquirer need buy back fewer shares?

[CityFarmer]

Could the massive buybacks by M1 be the precursor of easily divesting  M1 away, since the acquirer need buy back fewer shares?

The buy-back is "massive" due to past record, but is negligible with only 0.5% of the total outstanding shares involved.

(vested)

[CityFarmer]

The Consistel has finally spoken.   It has provided a totally different marketing approach than MR. The long term capital projection of S$ 1 billion is much more practical, than MR's one. MR's 1st round is $250 million, and more later, max at $700 million IIRC.

One important point, the competition from Consistel, will rise the bidding price, in the 1st round of bidding.

Consistel puts its name into 4th telco hat
18 Mar 2016 09:00
By Jacquelyn Cheok

WIRELESS network solutions provider Consistel told The Business Times on Wednesday that it would challenge MyRepublic for the right to become Singapore's fourth telco, amid a brewing telco war.

Twenty-year-old Consistel, whose investors include Intel Capital and Jafco Asia, said it has appointed an investment banker to help it raise more than S$1 billion through a mix of equity and debt for its mobility bid.

It said: "To truly compete with the existing mobile telecommunication operators, the new entrant must build and deliver to its customers a network that is equal or superior to what they experience now. The infrastructure needed for such a network would cost just over S$1 billion in the medium to long term."
...
Source: Business Times

[butcher]

M1 (M1 SP): HOLD
Market Cap: US$1,699m | Average Daily Value: US$1.92m
Last Traded Price: S$2.61; Price Target: S$2.60 (Downside 0%) (Prev S$2.60)

Analyst

Sachin Mittal +65 6682 3699 sachinmittal@dbs.com

Negatives are priced in but uncertainty lingers
The stock has declined 35% from its peak in April 2015. The stock has declined in anticipation of the potential entry of a 4th mobile player. The winner could be announced by the end of 1Q16 while actual operations may start from 2Q17 onwards. M1 is cheap at 13.6x FY16F PE versus 16x for StarHub as it has (i) a more price-sensitive user base; (ii) lesser number of subscribers on bundled offerings; and (iii) larger exposure to the mobile sector as a percentage of revenue. Conversely, if there is no 4th telco entry, M1 could benefit the most.

Lower dividends than last year. 4Q15 net profit of S$43.6m (-2.1% y-o-y) was in line. However, final DPS of 8.3 Scts (-30% y-o-y) was below expectations. FY15 dividend payout ratio stands at 80% versus 100% in FY14 as M1 wants to reserve cash for upcoming spectrum auction. Besides, we want to highlight that fixed service revenue grew 29% y-o-y in 4Q15 and made up 12% of the total service revenue.

Our bear-case TP is S$2.20 while bull-case TP is S$3.40. Our base-case TP of S$2.60 assumes 10% adverse impact on M1’s revenue due to the 4th player in 2022, with EBIT margins falling to 16% versus 20% currently. Under our bear-case scenario, we assume a 12% adverse impact on revenue in 2022 with EBIT margins dropping to 15%. Our bear-case TP is S$2.20. Under our bull-case scenario, we assume that there is no 4th telco entry and no adverse impact on M1’s revenue in 2022 although EBIT margins may slip to 19%. Our bull-case TP is S$3.40.

Valuation:
No changes to our DCF (WACC 6.8%, terminal growth 0%) based TP of S$2.60. Upgrade to HOLD.

Key Risks to Our View:
Non-entry of a 4th mobile player could lead to a relief rally. MyRepublic has completed a funding round to raise S$23m in Sep-15 which is not adequate for network rollout of US$250m-300m .


Source: DBS

[butcher]

M1: Guides for ‘stable’ 2016 earnings
M1 reported its 4Q14 results last night, with revenue slipping 11% YoY to S$307.9m, mainly due to lower handset sales versus a year ago (-27%), while net profit eased 2.3% to S$43.5m. For the full year, revenue climbed 8% to S$1157.2m, or about 9% above our forecast (mainly due to higher handset sales), while net profit edged up 1.5% to S$178.5m (just 1% below our estimate. M1 declared a final dividend of 8.3 S cents/share versus 11.9 S cents a year ago, bringing its total dividend to just 15.3 S cents (versus 18.9 s cents a year ago). Going forward, M1 believes that it can achieve a “stable” performance in terms of earnings growth in 2016, driven by mobile data and fixed services. However, it has raised its capex guidance to S$140m (versus S$133m in FY15) and will also incur spectrum payments; this in turns lower our DCF-based fair value from S$3.66 to S$2.95. Maintain BUY. (Carey Wong)


For more information on the above, visit www.ocbcresearch.com for the detailed report.


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Please refer to the full report for more information and additional disclosures.


OCBC Research Team
(65) 6531 9800
e-mail: info@ocbc-research.com




Source: OCBC