M1

M1: 3Q14 results in line. Net profit increased 12.7% y/y to $44.5m, while revenue climbed 3.5% to $250.2m, mainly from a 3.3% increase from the mobile segment, driven by a 3.4% increase in net postpaid ARPU to $55.2. Bottom line was also improved by lower traffic expenses (-29.4% to $12.7m). The data monetization story in M1 remains intact, as average data usage increased from 2.4GB/month to 2.9GB/month y/y. Maybank-KE thinks the sustainable trend is governed by 1) higher smartphone penetration for both postpaid (86%) and prepaid (35%), 2) rising postpaid users on tiered plans, now at 61% of postpaid customers ((+29ppt y/y, +3ppt q/q), and 3) higher smartphone and data usage among prepaid users, at 35% from negligible a year ago. While prepaid attritions should continue in the future, Maybank-KE thinks M1 can manage the attrition well, citing M1’s revenue growth from rising data usage compensating for subscriber attritions and declining IDD minutes. Nevertheless, Maybank-KE foresees a slightly weaker 4Q14 as subscriber acquisition costs increase following the launch of iPhone 6 and Samsung Note 4 in September and October respectively. Separately, the telco operator is shelving plans to be a receiver of cross-carriage content through its MiBox Internet TV service, and withdraws its application for a nationwide TV license. Latest broker ratings: Maybank-KE maintains Buy with TP of $4.24 UOBKH maintains Buy with TP of $4.00 BNP Paribas maintains Hold with TP of $3.75 Daiwa maintains Hold with increased TP of $3.44 from $3.38 HSBC maintains U/W with TP of $2.94