M1

M1: 1Q11 results marginally ahead, but operational trends not strong.
Net profit at $43m, +8% yoy, on lower than expected depreciation and finance costs. But revenue growth slowed to 4% yoy, as incremental impact of M1’s smartphone focus waned.
Post-paid and pre-paid ARPUs remained under pressure and were down 6% and 5% yoy rptvly, although this was mitigated by data ARPU +4% yoy to $21.8 as data’s share of ARPU climbed to 34.7% (vs 4Q10’s 33.3%)…

Mgt maintained guidance of FY11e net profit growth and 80% div policy, but commented that smartphone penetration now at “mass-market level” (60% of M1’s post-paid base), which could suggest further ARPU upside may be limited going forward.
1Q11 net adds of 23k was an improvement from 4Q10, but is substantially lower vs recent quarters in the past 2 years, and also suggests acquisitions may have peaked...

Main silver lining was in its fibre growth, as Spore NBN expanded to 16k customers at end Mar, of which M1 managed to capture one-third mkt share.
Deutsche keeps at Sell with TP $1.90, while HSBC downgrades to Underweight from neutral with TP $2.48, on lack of short-term growth catalysts.
Goldman, Credit Suisse keep at Neutral with TP $2.40, $2.66 rptvely.
Macquarie, Nomura, Citi, Morgan maintain Outperform/ Buy with TP ranging btwn $2.72 – 3.00, largely on NBN upside.