Left Brain Right B - the DBS Vickers Securities Equities Research
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Left Brain Right B - the DBS Vickers Securities Equities Research

Left Brain Right B - the DBS Vickers Securities Equities Research Left Brain Right B - the DBS Vickers Securities Equities Research

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Regional Equity Strategy 4Q 2009 Country Assessment This page has been left blank intentionally Page 53

Regional Equity Strategy 4Q 2009 MobileOne Bloomberg: M1 SP | Reuters: MONE.SI BUY S$1.78 STI : 2,672.60 Price Target : 12-Month S$2.05 Potential Catalyst: Clear strategy for NBN in place Analyst Sachin Mittal +65 6398 7950 sachin@dbsvickers.com Price Relative 2.50 2.30 2.10 1.90 1.70 1.50 1.30 1.10 S$ 2005 2006 2007 2008 2009 M o b ile O n e (LH S) R e la tive ST I IN D E X (R H S) Forecasts and Valuation R elative In d ex FY Dec (S$ m) 2008A 2009F 2010F 2011F Turnover 801 780 794 804 EBITDA 314 302 312 313 Pre-tax Profit 185 182 190 192 Net Profit 150 151 156 158 Net Pft (Pre Ex.) 150 146 156 158 EPS (S cts) 16.9 17.0 17.5 17.7 EPS Pre Ex. (S cts) 16.9 16.4 17.5 17.7 EPS Gth Pre Ex (%) (13) (3) 7 1 Diluted EPS (S cts) 16.8 17.0 17.4 17.7 Net DPS (S cts) 13.5 13.6 14.0 14.2 BV Per Share (S cts) 24.1 27.6 31.5 35.2 PE (X) 10.6 10.5 10.2 10.0 PE Pre Ex. (X) 10.6 10.9 10.2 10.0 P/Cash Flow (X) 5.8 5.9 5.9 5.9 EV/EBITDA (X) 5.8 5.9 5.5 5.3 Net Div Yield (%) 7.6 7.6 7.9 8.0 P/Book Value (X) 7.4 6.4 5.7 5.1 Net Debt/Equity (X) 1.1 0.8 0.5 0.3 ROAE (%) 72.1 65.8 59.1 53.1 Earnings Rev (%): - - - Consensus EPS (S cts): 16.4 16.6 17.4 ICB Industry : Telecommunications ICB Sector: Mobile Telecommunications Principal Business: MobileOne is one of the main telecommunication operators in Singapore. Source of all data: Company, DBS Vickers, Bloomberg 214 194 174 154 134 114 94 74 54 Hitting the right buttons for NBN • M1’s acquisition of Qala demonstrates a clear strategy of leveraging on corporate broadband opportunities through National Broadband Network (NBN). • Execution has evidently improved under the new CEO, who came on board in Jan 09. • BUY for 18% potential upside, 8% regular yield and likelihood of an additional 10% yield in FY10F, through capital management. Qala acquisition demonstrates M1’s clear broadband strategy. M1’s recent acquisition of Internet service provider Qala is likely to help achieve its target of at least 20% broadband market share by 2015. By acquiring corporate data capability through Qala, M1 should be able to secure some market share among SMEs, given Qala’s 9 years experience in the space. We estimate M1’s top line and bottom-line to grow by at least 20% and 10% respectively in the next five years from broadband alone. Most importantly, broadband offering would allow bundling multiple services together, which could lower the churn rate for the operator. Better execution under the new CEO. Ms Karen Kooi has set a clear goal of defending the market share and she delivered on her goal by arresting market share decline in 2Q09, without hurting the margins. Management is likely to achieve S$10m cost savings in FY09F through renegotiation of contract with network vendor and outsourcing of call centre operations. There is another S$10m backhaul cost savings in FY10F as M1 uses its own backhaul rather than leasing the network from SingTel. M1 remains our top sector pick. Our target price is S$2.05, pegged to 12x average FY09F-10F EPS, at 10% discount to our 13x target PER for StarHub. If M1 demonstrates solid execution on the NBN front, 10% discount to StarHub may potentially be removed. At A Glance Issued Capital (m shrs) 895 Mkt. Cap (S$m/US$m) 1,593 / 1,126 Major Shareholders Axiata Group (%) 29.7 Keppel T&T Ltd (%) 20.0 Singapore Press Holdings (%) 13.9 Free Float (%) 36.4 Avg. Daily Vol.(‘000) 927 Page 54 www.dbsvickers.com Refer to important disclosures at the end of this report ed: JS / sa: JC

Regional Equity Strategy 4Q 2009<br />

Country Assessment<br />

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Page 53

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