M1 (formerly: MobileOne)

[CY09]

A million dollar question: with its declining profitability, will the bank backing M1 continue lending it 250 mil at a low rate of approx 2.65% for a 5 years tenure or will it ask M1 to repay back some principal given the negative profitability outlook?

[money]

Indeed, this is a very important question. In fact, i think starhub will also face similar problems. I havent been following the singapore telcos lately. But from what i can remember, starhub is more leveraged than m1.

Sometimes i wonder why we need a 4th telco, it is so unfair to existing shareholders of the telcos. I may be a consumer and i like low prices but i think my monthly bill of $30++ is quite reasonable.

[weijian]

A bank will not reject business. This is especially true if your CORPORATE clients are in a reasonably high liquid cash flow business (asset heavy, consumer). Actually, the age old adage always stands - if u owe the bank a mil, it is ur boss. If you owe the bank 100mil, u r their boss. Atmost if the principle banker dont have this appetite to take the entire loan, they will syndicate this out.

3 telcos could be reasonable for a 4.5mil population. A trial for 4 players failed in a short reasonable time some 16years ago. But will 3telcos be enough for a 6mil population and eventually a 6.9mil one? I think policy makers are foward looking and deserve credit for this.

I do also pay about $30++ a mth after corporate discounts. But before the plan renewal, it was at least 25% more expensive, BEFORE the intention of a 4th telco became clear to the 3 incumbents (the incumbents are trying to lock existing customers down with cheaper plans and starve off the new kid in his first few years). Again, i suspect policy makers have learnt a hard lesson with the HDB supply crunch, persistent COE prices and bus/mrt crowding inflicting that Aljunied loss.

[yeokiwi]

Indeed, this is a very important question. In fact, i think starhub will also face similar problems. I havent been following the singapore telcos lately. But from what i can remember, starhub is more leveraged than m1.

Sometimes i wonder why we need a 4th telco, it is so unfair to existing shareholders of the telcos. I may be a consumer and i like low prices but i think my monthly bill of $30++ is quite reasonable.

Shareholders' rights are probably the last concern. Remember SMRT. So much unhappiness was poured out by the public over the dividends that SMRT had dished out during the good years.
The rights of consumers and staffs of Telcos are ranked higher than shareholders in the eyes of public and the authority.

The introduction of new players in the broadband (M1, Myrepublic) have reduced the cost of broadband significantly and I suppose it will certainly happen again for the mobile business. With a lower connection and data usage price, the consumers will be more willing to use 4G/5G network for IOT(internet of things), cars, kids' and old folks' safety.

The vision of an IT connected society does require a low cost connection to the connected world.

[Ray168]

Just sharing an article...

One stock is M1 (B2F.SG), the smallest of Singapore’s three telcos. Shares have dropped 25% in the past three months to trade below its five year average price-to-earnings multiple on concerns about a possible fourth telco operator.

However, Moermann argues Singaporean authorities may cancel or push back the award of a fourth telco license due to a lack of bidders with a strong track record of operating a local network.

Additionally, a fourth operator would add very little value to Singapore’s telco sector right now. In the event that a fourth license is awarded, Moermann argues the price competition wouldn’t be as intense as expected. He expects the new arrival would only have enough firepower to underprice incumbents by an average 7%.

The recent drop in M1’s share price - as well as a juicy 7.6% dividend yield - provides downside support, says Moermann. If a fourth telco doesn’t materialize, he expects M1 to quickly rebound to its recent average level of SGD2.50 a share, which implies 24% upside on its current level.


http://www.barrons.com/articles/activist...1479428932

[karlmarx]

Assuming that m1's income falls to $120m (or 12.8cts) a year after the entrance of the 4th Telco, a P/E of 10 will value m1 at $1.2b. This is $0.6b less that the current valuation of $1.8b.

[specuvestor]

M1 is viewed as a dividend stock to many; and the sustainability of M1's dividends are in its cash flows.

The first hit to its cashflow is evident by the fall in revenue which has trickled to its operating cash flow generation ability (-10%). On the contraray, specturm payments has not decreased 10% and remained the same. This simply means a fall in free cash flow. The establishment of the 4th teleco is going to be another black swan.

Secondly, like many "well-managed" SGX company, M1 has taken advantage of the low interest environment to grow its debts. Debts has grown 34% since the end of FY11. With impending rising rates, M1 will be faced with a rising interest expense. Revenue wise, M1 has not grown much since FY 11 (FY11 revenue: 1,064Mil vs 9MFY16 Rev: 747 Mil).

Lets look at its cashflow: Using 9MFY16 to extrapolate( i am being generous here as the first 6 months included the more expensive phone plans; 3Q was about 75mil), M1 op cash flow generation (before WC) is about 315mil annualy. Assuming fixed assets purchase stays at 133 mil (same as FY15) and, income tax of about 35mil and interest expense of 2% on its 400mil debt (8mil), Free cash flow is about 135 mil. That means if banks are generous enough to keep rolling the principal without asking M1 to pay it down and M1 pays out 100% of cash, shareholders are entitled to 14.55 cents dividends. This is below the 15.3 cents M1 paid in FY15 (last year payout ratio was 86%) .

With such a significant amount of debt, I hope M1 will consider setting aside 15 mil annually to repay principal. So shareholders will get about 12.5 cents dividend. Just agar from there how much will you pay for 12.5 div in an environment of rising interest rates and impending competition of a 4th teleco (which may weaken its cash flow ability)

We actually also talked about Starhub cashflow and moat some 2 years ago.
http://www.valuebuddies.com/thread-496-p...l#pid90696

What is instructive is that there were no catalyst back then even though we can see the fundy changed. So catalyst is important for both starhub and M1 to go down 25% in past 4 months.

[tikam tikam]

M1 is viewed as a dividend stock to many; and the sustainability of M1's dividends are in its cash flows.

The first hit to its cashflow is evident by the fall in revenue which has trickled to its operating cash flow generation ability (-10%). On the contraray, specturm payments has not decreased 10% and remained the same. This simply means a fall in free cash flow. The establishment of the 4th teleco is going to be another black swan.

Secondly, like many "well-managed" SGX company, M1 has taken advantage of the low interest environment to grow its debts. Debts has grown 34% since the end of FY11. With impending rising rates, M1 will be faced with a rising interest expense. Revenue wise, M1 has not grown much since FY 11 (FY11 revenue: 1,064Mil vs 9MFY16 Rev: 747 Mil).

Lets look at its cashflow: Using 9MFY16 to extrapolate( i am being generous here as the first 6 months included the more expensive phone plans; 3Q was about 75mil), M1 op cash flow generation (before WC) is about 315mil annualy. Assuming fixed assets purchase stays at 133 mil (same as FY15) and, income tax of about 35mil and interest expense of 2% on its 400mil debt (8mil), Free cash flow is about 135 mil. That means if banks are generous enough to keep rolling the principal without asking M1 to pay it down and M1 pays out 100% of cash, shareholders are entitled to 14.55 cents dividends. This is below the 15.3 cents M1 paid in FY15 (last year payout ratio was 86%) .

With such a significant amount of debt, I hope M1 will consider setting aside 15 mil annually to repay principal. So shareholders will get about 12.5 cents dividend. Just agar from there how much will you pay for 12.5 div in an environment of rising interest rates and impending competition of a 4th teleco (which may weaken its cash flow ability)

We actually also talked about Starhub cashflow and moat some 2 years ago.
http://www.valuebuddies.com/thread-496-p...l#pid90696

What is instructive is that there were no catalyst back then even though we can see the fundy changed. So catalyst is important for both starhub and M1 to go down 25% in past 4 months.

From an optimism/pessimism perspective, it is hard to see people buying expensive handphones where cheaper (better?) alternatives come into the market so if M1 has to market these phones, then there's less profit to be made everywhere. The catalyst is of course the new entrant; M1 selldown additionally also having trouble perhaps trying to prevent buyout (or short sellers may want to give the impression) so it (M1) needs to be financially conservative/prudent and very cautious operating in Singapore telecommunications business environment.

[WolfT]

M1 is now 10% of my portfolio, will keep buying till 20%. No use guessing on the outcome of the 4th teleco. If Starhub drops to $2, i would start to buy it too. I see this as an opportunity to buy instead to be fearful. We'll see in 3 years time.

[money]

M1 is now 10% of my portfolio, will keep buying till 20%. No use guessing on the outcome of the 4th teleco. If Starhub drops to $2, i would start to buy it too. I see this as an opportunity to buy instead to be fearful. We'll see in 3 years time.

in the long run, i think it will give a decent return. But i would like to offer some alternatives, why not invest in other telco like say china mobile?