M1

M1: 2QFY13 results came in at the higher end of estimates, which saw net profit at $39.2m (+11% y/y, -4% q/q) while revenue at $244.5m (+5% y/y, +1% q/q). EBITDA margins dipped slightly at 37% versus 38.1% y/y. The result brings 1H13 revenue to $487.5m, -2% y/y and net profit to $80.2m, +6% y/y. Performance was buoyed by strong contributions from group’s service revenue, on back of an 8% y/y growth in mobile revenue and a 35% growth in fixed network sales. The quarter saw M1 adding 55,000 customers to bring its total mobile customer base to 2.1m, of which 307,000 were 4G customers, while the group also added 7,000 fiber broadband customers bringing its base to 67,000. About 11% of the 4G users on tiered plans have upgraded to higher value plans, and the impact on ARPU is immediate. Average data usage also rose steeply to 3.2GB from 2GB in just a quarter, suggesting that users are breaking free of the bundled cap. Going forward, M1 guides that broadband data traffic is shifting from data cards to smartphones and faster networks and devices will continue to drive growth in data usage, and the group is well positioned to capture this growth. M1 has declared an interim div of 6.8c per share. Maybank-KE believe that M1 is shaping up to be a big beneficiary of data monetisation due to its pure mobile earnings base. With national fiber-optic network’s real coverage only at 30-40% of all households, house believe that as more customers exit contracts, the net-add pace should pick up beyond the current 7,000-8,000 per quarter. As such, fiber is another potential for the group. At current price of $3.12, M1 trades at 9x forward EV/EBITD backed with a forward dividend yield of 4.7%. Latest broker ratings as follow Maybank KE maintains Buy but lifts TP to $3.69 from $3.55 CIMB maintains O/p with $3.60 TP Credit Suisse maintains O/p with $3.60 TP Deutsche maintains Buy with $3.72 TP OCBC maintains Hold with $3.10 TP UOB Kay Hian maintains Buy but lowers TP to $3.58 from $3.72