• Close of offer on 4 Feb 2019
• Majority control would suffice
• Light at the end of the tunnel

Pre-condition Satisfied

As a recap, Konnectivity Pte. Ltd. (Offeror), a company jointly owned by Keppel Corporation Limited (KEP) and Singapore Press Holdings Limited (SPH), announced a pre-conditional voluntary general offer for M1 back in Sep 2018 at S$2.06 per share.

The Offeror has since satisfied the pre-condition of obtaining IMDA approval and has despatched the formal offer document to shareholders on 7 Jan 2019 for the voluntary conditional general offer of M1. Shareholders have up to 4 Feb 2019 to accept the offer, or such later date(s) as may be announced.

Not a High Hurdle to Cross

The Offeror’s intention is to gain majority control (i.e. more than 50%) of M1. In our view, this is not too challenging, given that (a) the Offeror and parties acting in concert have an aggregate interest in ~33.32% of M1, and (b) that the offer is not conditional on Axiata Group (28.67% stake in M1) tendering its shares.

Still, we are aware that the latter could possibly come in with its own competing offer (potentially in concert with other parties) at a more attractive price. We note that shareholders can withdraw their acceptances after 14 days from the first closing date of the offer, if the offer has not by then become unconditional as to acceptances.

A Fair Exit

In our 10 Dec 2018 sector report, we opined that it would be remiss of the market to discount the effect of TPG Telecom’s effect on ARPUs, despite the somewhat modest capex spend in Singapore.

As we have seen from TPG Telecom’s subsequent aggressive trial plan as well as generous offerings by incumbents, we believe our cautious outlook remains very much valid. In the absence of the above offer, we are of the opinion that M1 shareholders would continue to be exposed to further downside risks in such a competitive environment.

The offer price also comes at a 24.8% premium over our S$1.65 fair value prior to the pre-conditional offer, which we believe to be fair given the all-too-familiar headwinds. All considered, we maintain our current fair value of S$2.06 per share and revise our recommendation from Hold to ACCEPT THE OFFER.

Source: OCBC Research - 8 Jan 2019