Towards Financial Freedom
DBS Equity Research: Wired Daily 19 Jan 2016
M1 - Negatives are priced in but uncertainty lingers. Upgrade to HOLD, TP: S$2.60
M1's 4Q15 net profit of S$43.6m (-2.1% y-o-y) was in line. However, final DPS of 8.3 Scts (-30% y-o-y) was below expectations. FY15 dividend payout ratio stands at 80% versus 100% in FY14 as M1 wants to reserve cash for upcoming spectrum auction. The stock has declined 35% from its peak in April 2015, in anticipation of the potential entry of a 4th mobile player. The winner could be announced by the end of 1Q16 while actual operations may start from 2Q17 onwards. M1 is cheap at 13.6x FY16F PE versus 16x for StarHub as it has (i) a more price-sensitive user base; (ii) lesser number of subscribers on bundled offerings; and (iii) larger exposure to the mobile sector as a percentage of revenue. Conversely, if there is no 4th telco entry, M1 could benefit the most. Upgrade to HOLD, TP: S$2.60.
The Infocomm Development Authority of Singapore (IDA) and the Media Development Authority (MDA) will be restructured into two new entities: The Infocommunications Media Development Authority (IMDA) and the Government Technology Organisation (GTO). IMDA will take up the role of regulator and will be headed by current MDA CEO, Mr Gabriel Lim. GTO will be responsible for digital transformation in the public sector such as Smart Nation initiative and will be headed by current IDA Managing Director Jacqueline Poh. The re-organisation is in line with convergence in communications and media sector. However, it is not clear how this could impact the entry of 4th mobile player.
Keppel Infrastructure Trust(KIT) declared DPU of 0.93Scts for 4Q-2015, in line with our expectations, and at par with 3Q-2015 level. Group revenue was up 5% q-o-q to S$160.5m and net profit was up 110% to S$8.7m on the back of improved profitability at City Gas. No impact on KIT distributions from Basslink outage as Basslink has not been contributing to distributable cash flows for a while and was not expected to in the near future either. Sentiment on stock may, however, be affected to an extent until Basslink is back on stream and extent of eventual losses can be estimated.
Hyfluxhas been awarded a contract by Snamprogetti Saudi Arabia, a subsidiary of Saipem, to design, manufacture and supply a seawater reverse osmosis and sulphate removal facilities package in Khurais, Saudi Arabia. The project value is approximately US$ 50.4m. The contract is to be fulfilled over one year, and is expected to contribute to the financials of Hyflux for FY Dec16.
TA Corporation has secured a S$94m construction contract from the German European School Singapore (GESS). Including the latest contract win, the order book for the Group's construction business stands at approximately S$300m, and will be progressively recognised over the next three years.
Sunpower Group has secured a centralised steam Build-Operate-Transfer (BOT) project in Lianshui Economic Development Zone which is located at Jiangsu Province, China. The total investment is approximately RMB95m. This project will contribute to recurring income to the Group. Non-oil domestic exports (NODX) slumped 7.2% y-o-y last month - more than doubling from the 3.4% slide seen in November - and the trend is expected to continue in the months ahead. The consensus forecast was for a 4.4% contraction y-o-y and a 0.5% increase from November. Month-on-month, December's NODX declined 3.1%, although this narrowed from a 3.8% fall in November.
The year-on-year decline in December NODX was led by a contraction in both electronics and non-electronics NODX. Electronics NODX was nearly flat, edging just marginally lower by 0.3%, dragged down by integrated circuits (-11.3%), parts of PCs (-13%) and disk drives (-22%). Nonelectronics NODX decreased a bigger-than-expected 10.3%, thanks to double-digit drops in petrochemicals (-17.5%), primary chemicals (-41.8%) and civil engineering equipment parts (-43.5%). With the exception of the US, Japan and Hong Kong, shipments to all top ten NODX markets fell in December.
Source: DSB
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