The Good And The Bad: What Investors Should Know About M1 Ltd’s Latest First Quarter Earnings

M1 Ltd  (SGX: B2F)  is the smallest of the three telcos in Singapore that are currently operational.

In mid-April, the company released its 2017 first quarter results. There are both positive and negative takeaways from the company’s latest earnings that investors may want to learn about. Let’s take a look, starting with an overview of the numbers.

1. The overall numbers

The following’s a table showing some important items from M1’s income statement for the first quarters of both 2017 and 2016:

Source: M1 2017 first quarter earnings release

Although M1’s operating revenue was up 1.2% year-on-year, expenses grew at a faster pace, resulting in a decline in net profit of 14.6%.

M1 has four main business segments, namely, Mobile, International, Fixed services, and Handset sales. Of the four segments, Mobile and International delivered lower year-on-year revenue; Fixed Services and Handset Sales grew their top-lines.

2. The negatives

Firstly, M1’s average revenue per user (ARPU) in the reporting quarter declined across all its different services when compared to the first quarter of 2016. The largest drop in percentage terms came from the prepaid mobile business, where the ARPU was down by 17.1%.

Secondly, the company’s overall expenses grew faster than revenue, as mentioned. This effect can be seen in a shrinkage of M1’s net profit margin from 16.5% a year ago to 13.9%.

Thirdly, M1’s balance sheet weakened. Its net debt position jumped by 25.4% from S$300 million in the first quarter of 2016 to $376 million.

3. The positives

Firstly, its overall customer numbers are up for both its prepaid and postpaid services in the Mobile business. As a result, its mobile market share is up from 23.5% in the first quarter of 2016 to 23.8% in January this year. The company ended the reporting quarter with 775,000 prepaid customers (up 41,000 from a year ago) and 1.271 million postpaid customers (up 63,000 from a year ago).

Secondly, M1’s Fixed services customer base continues to grow,. The company ended its reporting quarter with 168,000 fibre customers, up 32,000 compared to the first quarter of 2016, and up 8,000 from the last quarter.

In sum, M1’s latest results reflect the challenges – in particular, pricing – that are within the telco business in Singapore. But, M1 was still able to grow its subscriber base and gain market share from competitors.

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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 contributor Lawrence Nga doesn’t own shares in any companies mentioned.