M1

UOBKayhian on 21 Jan 2014

FY14F PE (x): 18.9
FY15F PE (x): 17.1

M1 reported net profit of S$40.5m for 4Q13 (+7.1% yoy), in line with our expectations. Net profit increased 9.4% yoy to S$160.2m for 2013.Growth from mobile data. M1 added 5,000 post-paid subscribers and its post-paid subscriber base grew 3.2% yoy. The proportion of post-paid subscribers on tiered data plans has expanded from 32% in 3Q13 to 49% in 4Q13. About 16% of these subscribers exceeded their data bundle. Contribution from mobile data has expanded from 29.7% to 31% of service revenue. Thus, post-paid ARPU expanded 0.6% qoq to S$62.20.

Our target price is S$3.85, based on DCF (required rate of return: 6.7%, terminal growth: 1.0%). The increase in target price is due to: a) rolling forward our valuation into 2014, and b) factoring in the improvement in working capital. Receivables have improved from 61 days in 2012 to 52 days in 2013.