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Trading Ideas For The New Year: M1, Viva
Tradeable, Tradeable Ideas | 02 January 2014
By: Justin Harper
Articles (23) Profile

A new year is upon us and a chance for traders to wipe the slate clean and start afresh. This means searching out new investment opportunities and possibly reshuffling an existing portfolio.

Thankfully the local market is awash with plenty of choice, from large cap to small cap, well-known counters to yet-to-be discovered ones. Maybe this is the year you become Singapore’s answer to Warren Buffet.

Good luck.

M1 starts the new year with a bang

As the fireworks went boom over Marina Bay, so did M1’s data usage charges. M1 officially doubled its data usage charges from $5.30 to $10.70 per month per GB. It is also charging a minimum one-minute charge for excess outgoing local voice calls.

This re-pricing could boost revenues with some customers migrating to higher plans. On the flipside, it may also mean customers become more vigilant towards their usage patterns, and cut back on usage instead. Regarding rival networks, SingTel also doubled its excess usage charges in September 2013.

There has been a lot of focus on average revenue per user (ARPU) since the operators moved away from 12GB to tiered pricing plans.

Some observers felt that Singaporean telcos missed out on an opportunity to increase the base-line prices for all plans when 4G was launched. However, prices could still be hiked for 4G at a later date, further boosting the ARPU.

Nomura Securities says there are still the risks for M1 of more aggressive competition as well as its limited ability to offer fixed-mobile bundles and a macro slowdown in Singapore.

On the other hand, Phillip Capital Research believes M1 should benefit from growth in its Fibre broadband. The average uplift expected among analysts is 8.6 percent.

Long live business parks

Viva Industrial Trust (VIT) is focused on business parks which are tapped into Singapore’s progress into higher value-added services.

This has been identified as a growth segment for the long-term, with embedded master lease/rental support to ensure mid-term stability in cash flows. The catalysts for VIT are its better-than-expected earnings delivery and higher occupancy rates.

The shift towards high value-added industries continues to define Singapore’s industrial structure, with business parks playing an important role in housing such industries.

In July, Viva bought a mixed-used development, UE BizHub East, in Changi Business Park from United Engineers Ltd. for $518 million. This property in eastern Singapore, together with two other developments in the Tuas and Chai Chee areas, are the assets backing the trust.

VIT forecasted a dividend yield of 8.8 percent for 2014, according to an October filing. Viva raised $365 million through a share sale to Chinese property tycoon Tong Jinquan and the public. It floated on SGX in November 2013.

CIMB believes the Techno park@Chai Chee (TPCC) is currently under-rented at 60.7 percent occupancy and can potentially improve yields if fully leased at prevailing rents. The average uplift among analysts is for a 12.3 percent rise in the share price.

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Justin Harper is an experienced financial journalist who previously worked on the business desks of the Daily Mail, The Telegraph and Financial Times Business in London.

Please click here for more information about this author.

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