OVERVIEW:
Established in 1997, the counter is 2nd licensed telecommunication service provider in Singapore. Besides mobile and iDD services, it also provides fibre broadband and fixed voice services. Its major shareholders, Axiata Group (from Malaysia), Keppel Co, SPH are holding 28%, 19% and 13% of shares separately.
HIGHLIGHTS:
(1) In 1Q2015, SingTel and M1 achieved increases in total mobile revenue at 2% and 1.6% year on year respectively. Starhub reported drop of 0.2%. In Broadband segment, M1 outperformed the peers with 31.2% growth year on year.
(2) M1 management is guiding for "moderate" earning growth for 2015. It is also positive on its fixed services segment, where it expects to grow share in the government and corporate sectors, citing the launch of new services like ultra-high speed broadband plans, data centre and cloud-based applications.
(3) It has entered investment agreement with Telecom Oman (TeO) in Oman which is a high income country with 4mil of population. TeO is currently an international gateway operator and mobile services reseller. It could evolve to be 3rd mobile operator in Oman.
(4) Singapore could welcome a fourth Telco operator into mobile market. SMRT previously announced its intention for the 4th license, but has abandoned the joint bidding with OMGTel lately.
INVESTMENT THEMES:
(1) Amid market worry over interest rate hike and possibility of 4th Telco operator, M1 has shed 20% in share price over last 4 months. At current price level, the dividend yield could be ~5.7% which is the highest among its peers.
(2) Based on discounted cash flow model, target price of M1 is $3.58. Current share price presents 8% discount. DBS, OCBC and UOB have upgraded rating on the counter.
ENTRY PRICE:
BUY ~$3.2 which has been formed as support line from recent downfall.
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