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

* 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.

Swiber Holdings (SGX:BGK) shocked the Singapore Markets on 28-Jul, when it filed for liquidation, marking one of the biggest bankruptcy cases in the Offshore Marine business segment in the recent years. If you are affected or are just fascinated by the developments in the O&M segment, read on.

Here are some of the important facts:

Executive director and vice chairman Francis Wong, executive director and group chief financial officer Leonard Tay, and executive director Nitish Gupta, have all resigned. They cited a search for new opportunities and the pursuit of personal interests as reasons for quitting.

Swiber has a market capitalization of S$50 million. A far cry from the S$1.5 billion, during its peak around 2007. Trading of Swiber shares was halted on Wednesday, 27 July, when the stock last traded at 10.9 cents, down 48% this year.

According to SGX stockfacts, Swiber has total liabilities of S$ 1.9 billion and total assets of S$ 2.6 billion. However, given the slump in oil prices and the depressed O&M business environment, it is still unclear if the physical assets can be successfully converted to cash.

Among its debtors, which includes Citibank, BOA, UOB and Deutsche Bank, DBS appears to bear the heaviest burden with an estimated exposure of S$700 million. Swiber also has several outstanding bonds with a total principal amount of $550 million, yet to be redeemed.

My personal take away, as a small time investor from this event, is that the stock market can be really brutal! Surely, the management, being privy to sensitive corporate information, would have foreseen the project cancellations, tight cashflow and potential issues with mounting debt. Yet it seems like they choose the easy way out with a resignation and throwing the bond/shareholders to the wolves. 

The creditors at the bottom of the ladder (shareholders) will feel the brunt of Swiber's liquidation. Even in the best case scenario, where by existing assets can be converted to cash at value, its is highly likely that Swiber's bond and shareholders will be left with little to nothing.   

I have gone through some of the REITs with the Highest Dividends as well as some of the more resilient stock picks from the Oil/Gas & Shipping Industry now lets take a look at the more defensive telecommunication stocks available on the Singapore Stock Exchange.

For the quarter ended 31 March 2016, Singapore’s largest telco Singtel (SGX:Z74) registered flat year-on-year growth in net profit, while second-ranked StarHub (SGX:CC3) Ltd saw a 26% year-on-year jump. M1 (SGX:B2F), the smallest operator in the city-state, posted a 6.9% YoY decline in earnings.

For the current financial year, Singtel expects low single-digit growth in the Group’s consolidated revenue and EBITDA, excluding acquisitions, while StarHub has forecast a low single-digit increase in its service revenue. M1 estimates it will turn in a stable performance for the current year.

Singapore’s three telcos have a combined market capitalisation of about S$70 billion, with Singtel and StarHub both constituent stocks in the Straits Times Index. These three stocks averaged a YTD and five-year total return of -2.8% and +51.2% respectively. They also maintain an average dividend yield of 5.6%.

My take away from this is that the mobile service market is heavily saturated and growth will largely have plateaued (single digit growths). In the worse case scenario; the entrance of a 4th Telco and another price war, both M1 and Starhub would likely be most affected. Singtel, on the other hand, would likely be the least affected due to its diverse overseas customer base.