Company Name: M1 LIMITED
| Research House: Phillip Securities | Price Call: HOLD | Target Price: 2.41 |
Phillip Securities upgrades M1 to Neutral from Reduce. “Although net profits were low, and ebitda margins declined for the fifth consecutive quarter since 2Q11, we are upbeat on the improvement in service revenue, while noting that handset subsidies will be recovered in future quarters.”
It notes 3Q12 service revenue rose 2.9% on-quarter to $195.3 million on a larger customer base, but operating expenses rose 13.8% on-quarter to $213.2 million on increased handset costs. It expects nationwide LTE coverage and M1’s higher iPhone 5 subsidies vs peers will further increase its post-paid customer base.
“With the current uncertainty in the macro-economic environment, and as the search for positive real returns continue, M1’s dividend yield of 5.5% remains attractive at current prices. Fundamentally, M1’s service revenue growth continues to be healthy, while we do not expect any potential headwinds, other than a possible spectrum auction bidding war, for which M1 has the ability to compete in, possibly through an increase in borrowings from banks.” It raises its target to $2.41 from $2.38. The stock is up 1.1% at $2.69.
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