• FY13  net  profit  increased  9.4%y-y,  driven  by  growth  in  mobile  and  fixed services
• Special dividends of SGD 7.1 cents per share declared.
• Positive  outlook  for  2014  due  to  continuing  growth  in  mobile  data  revenue and enhanced fixed service offerings
• Maintain "Accumulate” with a new TP of S$3.68

M1  Ltd  announced its FY13  results  on 20 Jan  2013. Net profits  increased  9.4% y-y due  to  strong  growth  in  mobile  and  fixed  services.  EBITDA  margin  on  service revenue  was  38.1%.  Free  cash  flow  for  the  year  increased  to  S$176.4  million. Special dividends of 7.1 cents per share was declared, bringing the total FY13 DPS to SGD 21 cents. Management guided for moderate growth in earnings for FY2014 and maintain its dividend policy of 80% payout ratio. M1 will continue to invest in its  mobile  network  enhancements,  and  expects  a  nationwide  rollout  of  3G network  on  900  MHz  in  1Q14.  Upgrade  of  its  4G  network  to  LTE-Advanced  is expected to be completed by end 2014,  which  offers speed of up to 300 Mbps. The payments of S$40m and S$64m for the spectrum rights won in 2013 would be paid in Dec 2014 and Sep 2016 respectively.

How we view this

M1's results were above our expectations  and we are positively surprised by the high special dividends declared.  We continue to like M1 and remain optimistic on its outlook for FY14 due to continuing growth in mobile and fixed services and its attractive dividend yield. Growth would be driven by higher mobile data revenue and increasing fibre broadband customer base.

Investment Action

We  revise  our  estimates  to  reflect  FY13  earnings.  We  continue  to  see  further growth  potential  in  earnings  for  M1,  mainly  on  its  mobile  and  fixed  services segments. We maintain "Accumulate" rating with a new TP of S$3.68.

Source: Phillip Securities Research - 21 Jan 2014