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Analysts: M1 The Telco To Buy With More Than 20% Upside!
Aspire, Hot Picks | 15 June 2015
Related stocks:
B2F
By: Raymond Leung
Articles (142) Profile

Analysts' updates on M1 Limited as at 14/06/2015

News of a possible fourth telecommunications company (telco) has caused a huge stir in the market. Analysts have been attracted to the news and have begun analysing the sector for the effect of a new telco.

It would seem that M1 is the “winner” based on consensus estimates as analysts remain confident for the group to perform against its peers.

A Big If For A Fourth Telco

Previously, it was noted that SMRT through its partnership with OMGTel and MyRepublic (MR) were the main contenders for the fourth telco licence in Singapore. However, SMRT announced recently that it will not be contending for the licence leaving MR as the sole contender.

MR plans to spend US$250 million to US$300 million when it secures the licence. Given its small capital expenditure, the group targets a mere market share of 10 percent to 12 percent. With a lack of a strong partner, MR may struggle to raise the limited budget it had planned to commit for the fourth licence.

In view of the lack of bidders for the fourth licence, IDA might take a rain check in giving out the fourth licence. Even if MR is awarded with the licence, the impact to existing telcos is limited given the weak targeted market share by MR.

M1 To Outshine Its Peers



Source: Revenue of M1, Financial Times

Source: Net Income of M1, Financial Times

Revenue and net income for M1 based on FY10 to FY14 saw moderate growth. Looking at the most recent quarter, 1Q15, M1’s performance was in line with expectations from the street. Growth is expect to continue in FY15 in the percentage region of low teens while forecast for its peers stands at single digit.

M1 has plans to grow its market share in its fixed market segment which is mainly held by Singtel. It will be focusing on expanding its share in the government and corporate sectors. The launch of new services such as ultra-high speed broadband plans, data centre and cloud-based applications are expected to drive revenue for M1.

A Good Mix of Capital Appreciation and Dividend

A sell-down occurred shortly after the release of its 1Q15 results. Prices of the counter fell by 16.5 percent based on the current price of $3.33 from the 52 weeks high of $3.99. It is suspected that the rising interest rate has spooked the market rather than the performance of M1 as it outperformed its peers and STI.

Analysts from OCBC Research prefer M1 among the three companies and upgraded it to “Buy” with a potential upside of 9.9 percent. Furthermore, the dividend yield of 5.7 percent based on calculations by OCBC Research will be supporting M1’s price.

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

Please click here for more information about this author.

M1  -- -- --   
Business: [FY18 Turnover] Mobile telecom svcs (52%), handset sales (31%), fixed svcs (13%), int'l call svcs (4%).

Insight: Jan-19, FY18 revenue rose 4% mainly due to higher ... Read More


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