M1 is one of the three main Telco providers in Singapore. Within the mobile services space (post-paid), M1 commands a 23.1 percent market share in Singapore.
Although it’s the smallest among the three Telco players, M1’s ability in maintaining its frontal edge is widely reflected in the maintenance of its post-paid customers base, with steady increases in the number of post-paid mobile customers, post-paid average revenue per user (ARPU), and corresponding increases in its mobile service revenue.
M1’s mySim plan, launched just not too long ago which offers 5GB of data and 300 minutes of talktime at a basic monthly rate of $30 for a 12-month term is particularly interesting, and a good move targeted at the lean towards data driven users, and users who buy smartphones directly from the brands themselves or via online mediums.
M1, through this offering, showcased its nimble strategic ability to move with tailwinds, because a) M1 will not have to incur headset subsidies for customers signing up for this plan and b) offers the flexibility of a pre-paid but also encourages a conversion to a 12-month plan.
Its smart strategic agreement, with Liberty Wireless, a mobile virtual network operator (MVNO), scheduled to commence commercial operations by end 2015, will essentially put a total of three MVNOs on M1’s plate, which its providing voice, SMS and data services on a wholesale basis to.
This is a good stream of recurrent wholesale revenue that we see building up for M1 instead of pure reliance on its primary operations.
Likewise, M1 has also shown its free cash flow generation finesse, which has been positive for the past 7 years.
Return on assets, crucial for capital expenditure heavy companies like Telcos, have exhibited consistency around 13 percent over the past three years. This is a good sign of asset utilisation.
Return on capital (ROC) and return on equity (ROE) are also consistently high, averaging around 20 percent for the past five years (ROC) and close to 50 percent for ROE over the past five years.
Although M1’s net debt to earnings before interest, taxes, depreciation and amortisation (EBITDA) stands at some 0.9x, M1’s interest cover of 74x denotes its superior ability to pay off any short term debt.
This is due to M1’s effective interest rate being low at around one to two percent, resulting in lower interest expenses, while its peers’ effective interest rates are at around three to four percent.
The average dividend per share paid out by M1 over the past five years stand at around 17.6 cents.
At the time of writing, M1’s dividend yield is currently trading at 6.7 percent, highest among its Telco peers in Singapore; SingTel (4.6 percent), StarHub (5.8 percent).