• 1Q14 revenue was 1.2% lower y-y at S$240m, resulting from lower handset sales. Excluding handset sales, service revenue was higher 2.1%y-y.
• Net profit increased 4.4%y-y to S$42.8m for the quarter, driven mainly by growth in mobile, on higher subscriber base and data usage.
• Maintained positive outlook for FY14 on continuing growth in mobile services from data monetising.
• " Accumulate&rdquo with TP of S$3.68

M1 Ltd announced its 1Q14 results on 14 Apr 2014. Net profits increased 4.4% y-y to S$42.8m on growth from mobile and fixed services, offset by a decline in international call services. EBITDA margin on service revenue improved to 40% due to lower handset costs and traffic expenses, which resulted from lower handset sales volume and lower bilateral revenue respectively. Management continues to guide for moderate growth in earnings for FY2014.

M1 will continue to invest in its mobile network enhancements, and will launch VoLTE over its 4G networks in the coming months. Upgrade of its 4G network to LTE-Advanced is expected to be completed by end 2014, which offers speed of up to 300 Mbps. Management has shared its outlook on increasing demand by SMEs for ICT and hispeed connectivity solutions in the enterprise space for fixed services. The recently announced S$500m ICT program initiative by the government would partly help to drive demand. Management will continue to enhance M1' s solution offerings to meet the requirements by SMEs for their ICT solutions.

How we view this

We continue to like M1 and remain optimistic on its outlook for FY14 due to continuing growth in mobile and fixed services and its attractive dividend yield of over 4%. Growth would be driven by higher mobile data revenue and increasing fibre broadband customer base.

Investment Action

We made minor revision to our estimates to reflect 1Q14 earnings, while we remain positive on further growth potential in earnings for M1. Data monetisation will continue to be the key growth driver. We maintain " Accumulate" rating with TP of S$3.68, implying forward FY14F P/E of 20.5x.

Source: Phillip Securities Research

April 9, 2014

Singapore  SECTOR

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Lower handset subsidies for popular models such asSamsung

Galaxy S5 and HTC One M8 should see telco margins benefit.

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