M1 Limited
Prepared by :
Joyce Feng
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Agenda
Company Background
Business Drivers
Financial Highlights
Valuation
Risk Factors
Conclusion
Q & A
Company Background
Provides mobile voice, data
communications, broadband and fixed
communications services in Singapore
Operates high-speed fixed broadband, fixed
voice and other services on the Next
Generation Nationwide Broadband Network
(NGNBN)
Business Segment – FY2011
Data Source: Company
Business Drivers
Value company – revenue and profit stable in
previous years
Data Source: Company
Business Drivers
Stable performance in major segment - mobile
telecommunication services
S$m
Group revenues
Mobile telecommunications
International call services
Fixed network revenue
Handset sales
FY09
782
566
128
7
81
FY10
FY11
979
579
129
25
246
1,065
587
125
38
314
Data Source: Company
Business Drivers
Stable performance in mobile
telecommunication services
Mobile market share stood at 26.2% from Dec 2010
to Nov 2011
Attrition rate lower at 1.3% for FY2011
Potential revenue growth - well placed to
capture data growth due to introduction of
NGNBN (Next Generation Nationwide
Broadband Network)
Valuation
Price target derived from P/E Multiples
methodology
Assumes
average revenue growth of 5.8%
operating profit margin of 18.2%
Net income growth of 1.9%
Financial Highlights
Financial Highlights
(S$m)
Revenues
EBIT
Net Income
EPS
DPS
EBIT Margin %
ROIC (EBIT) %
Historical
Estimated Growth rate
FY2010 FY2011
FY2012
% YoY
979
1,065
1,127
5.8%
194
202
205
1.8%
157
164
167
1.9%
17.49
18.07
18.42
1.9%
17.50
14.50
14.74
1.6%
19.8%
28%
18.9%
27%
18.2%
27%
n.m
n.m
Historical Data Source: Company
Valuation
Co. Name
Historical P/E Ratio
M1
13.44
Starhub
16.01
Singtel
13.16
Fair P/E Ratio
(Average)
14.20
Source: Bloomberg
Valuation & Recommendation
Fair P/E ratio
14.20
Estimated FY12 EPS
$0.1842
Fair Value (P/E * est. EPS)
$2.62
Current Price
$2.44
Recommendation
Hold
Verification by Discounted Cashflow
Growth Rate (Yr 1 to 5)
Growth Rate after Yr 5
WACC
($M)
FCFF
NPV
minus debt
add cash
FY12e
$172
1.9%
0%
7.2%
FY17e FCFF
(r-g)
FY13e FY14e FY15e FY16e Terminal
$186
$190
$191
$193
$2,657
$2,635
($303)
$28
$2,360
Number of Shares
908 M
Fair Value per Share
$2.60
Verification by Discounted Cashflow
Source
Risk free rate
Input
3.0%
10yr Risk-Free Bonds
Beta
Input
0.72
Bloomberg
Equity Risk Premium
Input
7.5%
Market Risk Premium
Cost of Equity
Computed
8.4%
RFR+Beta*ERP
Cost of Debt
Computed
2.3%
Company
Equity funding
Computed
$ 2,177 m Company
Debt funding
Computed
$ 519 m Company
WACC
Computed
7.2%
Trading Data
52 week range
$2.32 - $2.70
Market Capitalization
$2.2 B
Share Outstanding
908 M
Free Float
37%
Average Daily Volume (3 mth) 632,000
Source: Yahoo! Finance
M1 vs STI
Source: Yahoo! Finance
Dividend Play
Div Payout %
DPS (Cents)
FY07
FY08
FY09
FY10
FY11
56
80
80
100
80
10.8
13.4
13.4
17.5
14.5
Dividend Yield = 5.9%
(Based on $2.44 price as at 10 Feb 2012)
Source: Company
Risk Factors
Sharp decline in handset sales and roaming
revenue if global recession occurs.
Slow growth in Fixed Line business due to slow
NGNBN (Next Generation Nationwide Broadband
Network) rollout.
Negative impact on dividend policy under weak
cash and high gearing position if credit crunch
occurs.
Q&A