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Analysts: M1 Is The Telco To Buy Now
Aspire, Hot Picks | 22 January 2015
By: Raymond Leung
Articles (142) Profile

On Monday, M1 announced strong FY14 results. Operating revenue for 4Q14 was up by 24.3 percent year on year (YoY) while FY14′s figure increased by 6.8 percent year-on-year (YoY). FY14 was 3 percent above the expectations of consensus estimates.

The strong seasonal sales of the iPhone 6 in 4Q14 was the main attribution for the surge in sales for the quarter. Cost of sales surged by 37.7 percent YoY this quarter as M1 saw strong demand for iPhone 6 among its customers.

In terms of net profit, M1 saw a 9.3 percent growth for the quarter YoY while FY14 grew by a stronger 9.9 percent.

The mobile sector continued to be the main driver for M1 for FY14 as its postpaid customer base grew slightly by 19,000 to 149,000. However, its prepaid customer base was reduced by 276,000 to 703,000 due to new government regulations that restricts the number of prepaid cards owned by an individual.

The stronger postpaid growth was able to make up for the lower prepaid segment and helped push the mobile sector towards growth. This growth was contributed by subscribers who contracted to tiered data plans. As of FY14, 66 percent of the postpaid subscribers were on tiered data plans where average revenue per subscriber was $2 to $3 per month.

The corporate dividend policy of M1 is in favour of investors as the company sustained its 100 percent dividend payout. M1 has declared a final dividend of $0.119 per share for FY14.

Analysts from OSK-DMG remained positive towards M1 as they make no changes to the firm’s FY15-16 forecast. They gave M1 a “Buy” call with a potential upside of 17.96 percent. However, analysts anticipate that there are several earning risks for M1. These include a stronger than expected competition, higher customer acquisition costs and inadequate spectrum resources.

Trained in fund management, Raymond is familiar with shares and various investment vehicles.

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