- 2Q14 results within expectations. Interim DPS raised to 7 SGD cts. Maintain BUY, TP SGD4.24.
- Underlying momentum for tiered data migration and strong growth in data traffic remained strong.
- Balance sheet remains strong and supportive of higher dividend payouts.
M1 reported in-line net profit of SGD43.9m in 2Q14 (+12% YoY, 2% QoQ), taking 1H14 earnings to SGD86.9m, representing 50.7% of our full-year forecast. M1 also raised its interim DPS to 7 SGD cts. We maintain our forecasts as 2H14 profits may be slightly weaker following the launch of the iPhone 6. Our DCF-based TP also stays unchanged at SGD4.24. Maintain BUY.
Underlying trends still positive
Data traffic and tiered plan migration continued strongly in 2Q14, driving postpaid mobile revenue up 5.4% YoY. This is in line with our expectations and underpinned by 58% of postpaid users now on tiered plans, up 4ppt QoQ and 32ppt YoY. We expect further upside to tiered data migration to further drive growth. On the cost front, subscriber acquisition cost fell on lower demand for premium handsets and lower marketing costs from higher demand for shared bucket plans.
Prepaid, broadband contained
Following the new 10-to-3 SIM card ruling on 1 Apr, prepaid users fell but prepaid revenue and ARPU recovered as M1 drove more top-up activities. On the highly competitive home broadband
front, M1 has been able to contain the situation by offering more free months subscription instead of cutting prices further.
Catalysts: more dividends, entry into Pay TV
Balance sheet remains strong even after SGD131.8m in dividends paid in 2Q14. Along with higher ordinary dividends, there is still potential for a second special dividend this year, in our view. Also, M1 is pursuing a Pay TV licence and may enter the fray in 2015.
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