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M1 Limited - Ringing up the data till

Shared By Stock Fanatic on Wednesday, July 17, 2013 | 17.7.13

Annualised 1H13 core net profit met both CIMB and consensus estimates at 96% and 99%, respectively. The surging take-up of tiered data plans is starting to show, with service revenue growth soaring to a 10-year high of 8% yoy while EBITDA margin is fairly resilient.

Despite the higher subsidies for the Samsung Galaxy S4 launch, M1 declared a DPS of 6.8 Scts (77% payout), which is higher than the 6.6 Scts (80% payout) in 1H12. It remains our top Singapore telco pick and one of our preferred telcos in the region. M1’s strong earnings growth is a re-rating catalyst for the stock.

A strong quarter
M1 posted a solid 2Q13 because of 

1) the surge in mobile service revenue, up 8% yoy in 2Q (the highest in more than 10 years). Postpaid ARPU rose 2% qoq, which we believe indicates the beginning of an upward trend in ARPUs, driven by the rapid take-up of tiered data plans. 26% of M1’s postpaid users are now on tiered plans from 20% in 1Q13. 

We expect our estimate of 35% at end-FY13 to be exceeded. The users on tiered data plans pay S$3/month more than users on the old plans or 5% of postpaid ARPU, 

2) wireless broadband users that continued to drive subscriber growth, and 

3) the resilient EBITDA margin that declined by only 1.2% pts qoq despite the higher subsidies expensed for the Samsung Galaxy S4 launch in 2Q. M1 lowered its FY13 capex guidance to S$130m from S$130m-150m as it now has a better estimate of its spending.

Less spectrum required
In response to our question on why M1 only bid for 2x20MHz of spectrum in the 1800MHz band vs. the 2x25MHz that it occupies today, management said that it will require less 1800MHz spectrum in the future because 1800MHz spectrum currently carries 2G traffic and will be freed up when 2G users migrate to 3G or 4G. 

The spectrum will be used mostly/exclusively for 4G/LTE traffic by 2017, when it is refarmed. The spectrum payments of S$40m for the 2x20MHz in the 2.5GHz band and S$64m for the 2x20MHz in the 1800MHz band are due on 14 Dec and 16 Sep, respectively. (Read Report)

Read Related Reports
M1 Ltd - UW: 2Q13 results only in line despite better revenues
Wednesday, 17 July 2013
- HSBC Global Research
M1 - Good 2Q13 performance, Buy as our top pick
Tuesday, 16 July 2013
- Deutsche Bank Markets Research
M1 – Bet On M1 At The “Datarat” Table
Wednesday, 17 July 2013
- Maybank Kim Eng Research

Source : CIMB Research

Posted on Wednesday, July 17, 2013 | 17.7.13

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