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After Falling Almost 10%, Is It Time To Buy M1 Now?
Tradeable, Tradeable Ideas | 24 October 2014
By: Raymond Leung
Articles (142) Profile
  • M1′s 3Q14 results saw continued growth from the previous quarter. M1′s mobile segment grew 3.3 year-on-year.
  • Higher customer base and expiry of promotional discounts for fibre broadband services drove revenues from fixed services.
  • Firm growth fundamentals and attractive valuations from the recent market sell-offs are good indicators for investors to go long on M1 now.

Analysts' updates on M1

Last week, M1 announced its 3Q14 results which saw continued growth from the last quarter. Mobile data continued to be the main driver of revenue for the mobile segment with a 3.3 percent year-on-year (YoY) gain. However, this growth was offset by the lower revenue from the mobile prepaid segment.

This is due to regulatory changes that lowered the quota of prepaid card per person from the previous ten to three which kicked in April this year. International call services (IDD) continued to shrink on falling retail revenue to $21.5 million.

Higher customer base and expiry of promotional discount for fibre broadband drove revenue of fixed services. Higher sales volume for handset increased its revenue by 20.6 percent YoY.

Overall, EBITDA margin for service revenue grew to 40.8 percent from 37.6 percent of the previous quarter. The current quarter was well perceived by analysts as figures fell within consensus estimates.

Growth is expected to continue in M1’s mobile and fixed services with higher mobile data usage and increased fibre broadband uptake as the main drivers. However, M1 might face possible further price erosion from its fibre segment as competition intensifies.

Analysts from Phillip Securities Research upgraded the counter from “Hold” to “Buy” with a potential upside of 12.8 percent. They cited the firm growth fundamentals and attractive valuation from the recent market sell-off as the main reasons for rerating.

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

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