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The Three Numbers That Make M1 Mighty

M1Singapore’s third largest telecom provider is M1 (SGX: B2F). It was formerly known as MobileOne but, understandably, changed its name in 2010 since it does more than just provide cellphone services. It also has fixed line and broadband that it provides to its 2 million or so customers.

Although M1 is the smallest of the three major telecom companies in Singapore, it punches well above its weight in terms of its Return on Equity. The returns that shareholders enjoy on every dollar of invest capital is one of the highest in the market. At 42%, it is over four times higher than the average for the 30 companies that make up Straits Times Index (SGX: ^STI).

Interestingly, M1’s Net Income Margin of 13% is not especially high. It is on par with that of StarHub (SGX: CC3) and slightly lower than the profit margin of telecom behemoth SingTel (SGX: Z74). However, M1 is very good at sweating its assets. Last year the company rung up $1.10 in sales for every dollar of asset employed.

M1 also uses leverage, otherwise known as other people’s money. Its leverage ratio of 2.8 is not worryingly high but nevertheless higher than the market average of 1.7.

By piecing together to various parts of M1’s business, it is easy to see how the company runs its business. Its remarkable Return of Equity of 42% is the product of a healthy Net Income Margin of 13.6%; an enviable Asset Turnover of 1.1 and a manageable Leverage Ratio of 2.8.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.