I have previously discussed the 3 Telcos in Singapore and the pressures of declining revenues in the face of stiffer competition and mobile market saturation. The release of the Q3 results by M1, seems to add weight to the concerns surrounding our local telcos.

M1 (SGX:B2F), released their Q3 results, with an interesting headline: "Net profit fell by 23.4%, y-o-y, to $34.4 million". It reported an increase in new sign-up customers this year but lower handset sales dented its third-quarter numbers - likely to exclude the figures related to the iPhone7 launch.

Althought total service revenue - which comprises turnover from mobile telecommunications, fixed and international call service - dipped 3.6 per cent to $197.1 million, M1 continued to grow its customer base by 6.7 per cent over the year.

M1 noted that the global telecommunication sector continues to face challenges, resulting in a fall in traditional revenues, associated with data usage. "While customers consume more data with over-the-top applications, growth in data revenue is likely to be moderated by competitively priced data offerings." In my opinion, this concern will likely be exacerbated by the potential entrant of a 4th Telco.

Based on the current outlook and barring unforeseen circumstances, M1 said its full-year net profit after tax will likely show a decline of around the same level as that seen so far this year.

Net profit for the first nine months was down 12.6 per cent to $117.9 million over the same period a year ago. Earnings per share for the third quarter fell 22.8 per cent to 3.7 cents from 4.8 cents a year ago. Net asset value per share fell to 39.9 cents from 44.1 cents at the end of last December.


Year Yield Amount Ex Date Pay Date Particulars
2016 6.89% SGD 0.07 26/07/2016 04/08/2016 SGD 0.07 ONE-TIER TAX
SGD 0.083 12/04/2016 21/04/2016 SGD 0.083 ONE-TIER TAX
2015 8.51% SGD 0.07 31/07/2015 18/08/2015 SGD 0.07 ONE-TIER TAX
SGD 0.119 17/04/2015 30/04/2015 SGD 0.119 ONE-TIER TAX
2014 6.35% SGD 0.07 06/08/2014 15/08/2014 SGD 0.07 ONE-TIER TAX
SGD 0.071 11/04/2014 25/04/2014 SGD 0.071 ONE-TIER TAX
2013 6.67% SGD 0.068 31/07/2013 15/08/2013 SGD 0.068 ONE-TIER TAX
SGD 0.017 11/04/2013 25/04/2013 SGD 0.017 ONE-TIER TAX
SGD 0.063 11/04/2013 25/04/2013 SGD 0.063 ONE-TIER TAX
2012 6.53% SGD 0.066 20/07/2012 14/08/2012 SGD 0.066 ONE-TIER TAX
SGD 0.079 11/04/2012 26/04/2012 SGD 0.079 ONE-TIER TAX
2011 8.02% SGD 0.066 27/07/2011 11/08/2011 SGD 0.066 ONE-TIER TAX
SGD 0.077 11/04/2011 26/04/2011 SGD 0.077 ONE-TIER TAX
SGD 0.035 11/04/2011 26/04/2011 SGD 0.035 ONE-TIER TAX
2010 6.08% SGD 0.063 28/07/2010 11/08/2010 SGD 0.063 ONE-TIER TAX
SGD 0.072 14/04/2010 27/04/2010 SGD 0.072 ONE-TIER TAX
2009 6.04% SGD 0.062 29/07/2009 12/08/2009 SGD 0.062 ONE-TIER TAX
SGD 0.072 09/04/2009 27/04/2009 SGD 0.072 ONE-TIER TAX
2008 3.74% SGD 0.083 10/04/2008 25/04/2008 SGD 0.083 ONE-TIER TAX
2007 76.69% - 10/12/2007 27/12/2007 APPROXIMATELY SGD 0.046
SGD 0.025 13/09/2007 27/09/2007 SGD 0.025 ONE-TIER TAX
SGD 1.6026 10/05/2007 25/05/2007 PER CANCEL SH SGD 1.6026 ONE-TIER TAX
- 10/05/2007 25/05/2007 PER CANCEL SH SGD 0.6174
SGD 0.075 10/04/2007 27/04/2007 SGD 0.075 ONE-TIER TAX
2006 11.76% SGD 0.058 01/09/2006 21/09/2006 SGD 0.058 ONE-TIER TAX
SGD 0.081 03/04/2006 26/04/2006 SGD 0.081 ONE-TIER TAX
SGD 0.122 03/04/2006 26/04/2006 SGD 0.122 ONE-TIER TAX
2005 4.86% SGD 0.05 02/09/2005 22/09/2005 SGD 0.05 ONE-TIER TAX
SGD 0.058 06/04/2005 26/04/2005 SGD 0.058 ONE-TIER TAX
2004 13.69% SGD 0.2 14/12/2004 28/12/2004 CAPREDCANCEL/SH SGD 0.2 ONE-TIER TAX
- 14/12/2004 28/12/2004 CAPREDCANCEL/SH SGD 0.225
SGD 0.049 03/09/2004 23/09/2004 SGD 0.049 ONE-TIER TAX
SGD 0.055 31/03/2004 21/04/2004 SGD 0.055 ONE-TIER TAX
2003 5.05% SGD 0.039 05/09/2003 25/09/2003 SGD 0.039 ONE-TIER TAX
SGD 0.0585 21/04/2003 12/05/2003 SGD 0.0585 TAX EXEMPT
SGD 0.0145 21/04/2003 12/05/2003 SGD 0.0145 ONE-TIER TAX

Debt and Cashflow


The level of cash and debt is a rough gauge of how strong or weak a company’s balance sheet is. In general, when debt is really high, a company runs the risk of having to eliminate or reduce its dividends, especially when its business runs into difficulties.

For M1 (2015), the company has S$105.7 million in free cashflow and S$343.8 million in net borrowing. A Net Debt/Equity ratio of 0.8. A healthy '*free cashflow' figure would indicate the ability of a company to return value to shareholders, in the form of dividends. 

* Free cash flow refers to net cash provided by operating activities less current year capital expenditure 

Summary


M1 has been consistent with its dividend payouts over the years, returning an average of 5-7%. It has also been able to grow its operating revenue over the years. It has enjoyed a relatively healthy mobile subscriber base of ~23%, a core component of its business operating revenue. Its debt to equity ratio is reasonable for the nature of its business, consistent free cash flow enables it to return value to its shareholders.

However, it is worthwhile to note that in a very competitive (potential 4th Telco) and saturated telco market like Singapore, innovation and diversification will be key to improving its bottom line. With the recent downward price movements, I am looking to add M1 to my portfolio when the price is right and when things are clearer with regards to a potential 4th telco entrant.

TAGS : | | |