Monday, November 7, 2016

M1 Ltd - A Different Perspective


M1 Ltd has been falling for a prolonged period, from the heights of $3.930 on April 2015, till $2.020 on 31 Oct 2016, before recovering slightly recently. Over the period of freefall, there was also a slight recovery during this period of fall.

Nevertheless, as per the chart below, the share price is currently at the lowest point over the last 5 years.



Why?

Many factors has caused this downfall, such as the pending establishment of the 4th Telco, the Jan-Feb 2016 correction, the insider selling by the CEO and also the recently released 3rd Quarter financials which were deem to be "very poor".

These factors were further enhanced by analyst reports that states M1 Ltd will be the worst hit among the 3 Telcos. Yes, people continues to be "addicted" to analyst reports.

So there are some truth...

1. M1 will be the most badly hit by the emergence of 4th Telco - This factor, as reported by many analyst reports, is due to M1's business model. Being the smallest Telco, non-diversified business that solely focus on telco business and having mainly customers in Singapore are some of the reasons many believe will cause M1 revenue and net profit to fall greatly in future. This will then in turn affect the company's dividend payment in future.

2. Quarterly Revenue and Net Profit on a downward trend - By looking at the last 4 quarters' revenue and net profit, you can't help but notice the downward trend the company is in.


3. Lack of Catalyst and Direction - With Singtel going into cyber-security, and Starhub also going into cyber-security and investing in MM2 Asia Ltd as well, M1 seem to be directionless.

4. CEO actually sold some shares recently - This one I got nothing to say.

But it is still NOT the end of the world...

1. It is still early days for 4th Telco - Does anyone still remember Virgin Mobile? The telecom company that was in Singapore for less than half a year. This indicate that it is actually very hard to to break into the current Singapore Telco Industry. Furthermore, I have stated before;

"(6) Bidders of the 4th Telco "expects" to gain about 10% to 15% of the market share. This is not drastic to M1 or Starhub. Nevertheless even if a dropped in Revenue, a company may still maintain its dividend amount."

YES, a 10% to 15% drop in market share will not be drastic. AND M1 will not be the only telco company that will be affected. Singtel and Starhub will ALSO BE AFFECTED! Wake up!

2. 4th Telco is already out - Circles.Life can actually be the 4th Telco. This telco service is formed from the partnership of M1 and Liberty Wireless. With many people already switching over to Circles.Life, you can actually state that this partnership is the 4th Telco. Furthermore, do note that this is a partnership with M1. Thus, even if M1 losses some customers, it may still stand to gain as we do not really know what is stated in the agreement. But if customers leave Starhub or Singtel, there is only loss for these companies.

3. M1's Fibre Boardband Customer - Despite a drop in M1's mobile customer, but M1 continues to increase its fibre broadband customers. M1 has been stepping up on getting more fibre boardband customer, ever since Singapore started to have fibre boardband. In my opinion, M1 has the first mover advantage in this area.

4. The future is bright - Despite not having much news about its future, M1 has actually made some progress;
 - M1 and Ascendas-Singbridge will start on the 1st fibre-ready building installation that will be completed in 2018
 - M1 purchase of shares in Octopus Retail Management Pte Ltd.

5. Temasek Holding bought M1 shares recently - This is what sparks the recent mini recovery. You will feel amazed if you actually purchased M1 at a share price that is lower than what Temasek Holding bought them for.

6. In my opinion, M1 is better than Starhub - In the business world, M1 is focusing on fibre boardband and data, while Starhub continues its hubbing strategy. I believe this will not work that well for Starhub because we can forgo SCV and use data to stream online. In this way, a M1 user can watch the shows, that is actually shown on SCV, on other website and they do not need to pay extra. But a Starhub user may need to pay slightly more for SCV.

7. M1 Ltd continues to enjoy the competitive advantage of being the only 3 or 4 Telecommunication companies industry - With such high barriers to entry, M1 continues to enjoy being one of main telecommunications operator in Singapore. This can be emphasize by the announcement of 4th Telco, which IDA has to take such a long time to decide on who can be the 4th Telco in Singapore.

8. Humans are generally lazy - In my opinion, I believe that switching telco company is not such a easy thing to do. This is because humans are generally lazy. If there is no issue, why change? Furthermore, all of us sign on for 2 years. To switch mobile operator, you need to wait 2 years.

In Short 

In view of the reasons above, instead of selling my M1 shares, I will continue to buy and average down my share price for M1 Ltd.

Current Price: $2.100 as of 7 Nov 2016.

Please do your own due diligence before you invest in this stock.

Do note the author is vested in this stock/company at an average share price of $2.390. 

For those who are interested to understand and find out more about the Enhanced Triple S Scorecard with the Dividend Scorecard Portion, you can come for the 4th Sharing Session with T.U.B! If you are interested to attend, do not hesitate to contact me directly.

For those who intend to try the Enhanced Triple S Scorecard first before attending the sharing session, you can contact me directly as well

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8 comments:

  1. So true...."Humans are generally lazy"... imagine having to tell all your friends your new number....

    ReplyDelete
    Replies
    1. Hi Clive

      Thanks for dropping by and commenting.

      If I am not wrong, you can also switch over and use old number, but you need to pay more. That's the hassle.

      Regards,
      TUB

      Delete
  2. Hi,

    Virgin Mobile is a MNVO so it is easier for them to back out.

    The stickiness of hubbing strategy of 500k users and Singtel geographical diversification will be a factor for both for them to fare better. Which is why most analysts are saying M1 may fare worse.

    Starhub has more than 500k of hubbers whereas M1 has only 150k of fibre broadband users, I am wondering what kind of first move advantage you are talking about?

    I find that your arguments are flawed and you may need to do a more thorough analysis.

    ReplyDelete
    Replies
    1. Hi Blanc Fable,

      Thank you for commenting and stopping by.

      For Virgin Mobile, I just want to showcase how difficult it was to break down the market share from the 3 Telco companies.

      I never stated anything about Singtel. Because I understand Singtel is more superior in terms of geographical diversification.

      As for Starhub, what I tried to explain is that the hubbing strategy includes SCV, and I doubt Starhub ability to sustain the revenue in that portion.

      As for being the 1st mover advantage, I could be wrong, but I read it somewhere that M1 was the first mover into fibre broadband.

      I could be wrong and please correct me if I am, but are hubbers still on cable or on fibre?

      All in all, what I am trying to explain is that M1 Ltd is not as bad as what all the analyst are talking about.

      I am not stating it is the best among the 3 of the telcos.

      Hope this explains my point of view.

      Regards,
      TUB

      Delete
  3. 500k Hubbers are on mobile, broadband (fixed line or fibre) and cable tv.

    ReplyDelete
    Replies
    1. Hi Blanc Fable,

      Thanks for the clarification.

      In this case, if Starhub is able to convince all their hubbers to get all their facilities, most probably we can see the benefit soon in their books.

      Anyway as stated previously, my point of view is that I don't believe M1 is in such a dread state.

      Good luck to both of us (most probably you are a starhub investor)!

      Regards,
      TUB

      Delete
  4. Hi TUB,

    I personally think M1 is also a viable stock to hold too and I agree that M1 is not in such a dread state. I am also trying to find an entry point as it is not that simple to value a stock with a big headwind. I am not a starhub shareholder but I read their reports and I am more keen on Singtel instead.

    The first mover advantage is more of being in internet business first (fixed line) and not being first in fibre broadband. Though I remember starhub shouldnt be too far behind M1 in fibre.

    Other than that, lets hope you have a successful investment journey.

    ReplyDelete
    Replies
    1. Hi Blanc Fable,

      Thanks for your explanation.

      I have Singtel too. But I also have M1.

      And yes... lets have a successful journey ahead.

      Regards,
      TUB

      Delete