M1

M1: 4Q14 net profit in line, rising 9.9% y/y to $44.5m, bringing FY14 net profit to $175.8 (+9.7%). In the quarter, total revenue ($346.4m, +24.3%) was driven by a 5.3% increase in mobile telecommunications revenue ($172m), and an 88.7% surge in handset sales to $135.1m. Delving into revenue trends deeper: 1) Telecommunications revenue driven by post-paid (+5.9%, 88% of mobile telecommunications revenue) 2) Net post-paid ARPU rose 4.4% to $56.8 3) Though data plan ARPU fell 6.6% to $18.3, this was diluted by bundled packages. Data consumption increased to an average of 3GB/month, relative to 2.5GB a year earlier. 4) The surge in handset sales was aided by iPhone 6 sales. In tandem with that, cost of sales for handset grew 60%, as iPhones are typically more heavily subsidized than other smartphones. EBITDA margin on service revenue rose 2.7ppt 40.9% On outlook, management guides for a “moderate” growth in 2015, similar to 2014. M1 had in December launched Singapore’s first nationwide next-gen 4G network, doubling download speed up to 300Mbps. At end FY14, 66% of postpaid users were on tiered plans, and 22% of tiered plan users exceeded monthly data allowances, a tailwind for margins. In short, M1’s data monetization story remains intact. In addition, Maybank-KE opines other factors which could bode well for M1: 1) Completion of new data center in 2015 to capture more corporate business 2) Rolling out a suite of enterprise cloud services, targeting SMEs 3) As capex falls, there is likelihood of dividend upside. Maybank-KE prefer M1 as a top Buy in the telco sector, with TP of $4.24. Final DPS of 11.9¢ proposed, bringing full year payout to 18.9¢, translating to a 5.2% yield Other broker ratings: JP Morgan maintains Overweight with TP of $4.15 Nomura maintains Neutral with TP of $3.90