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M1 Ltd’s Latest Earnings: What Investors Need to Know

Yesterday evening, M1 Ltd (SGX: B2F) announced its third-quarter earnings results. The financial period was from 1 July 2017 to 30 September 2017.

M1’s business is split into four segments – mobile telecommunications services, fixed services, international call services, and handset sales. The first three segments are collectively known as service revenue.

Here’s a quick rundown on M1’s key financial figures from the latest quarter:

1. Total revenue came in at S$251.6 million, up 1% year-on-year. This was mainly due to higher service revenue, which grew 4.9% to S$206.7 million. Services revenue increased on the back of robust sales in the mobile telecommunications services and fixed services segments, partially offset by the fall in revenue from international call services.

2. Despite the rise in revenue, net profit declined 4.8% year-on-year to S$32.7 million.

3. Consequently, diluted earnings per share for the quarter was at 3.5 Singapore cents, down 4.5%.

4. As of 30 September 2017, M1 had a net debt of S$397.9 million. This is a slight deterioration from the S$390 million in net debt that it had on the last day of 2016.

5. Cash flow from operations was at S$107.5 million and S$27.6 million was spent on capital expenditure. Therefore, the telco brought in S$79.9 million in free cash flow for the latest quarter, a vast improvement from S$7.0 million raked in a year ago.

For the nine months ended 30 September 2017, total revenue increased 2.3% year-on-year to S$763.9 million. Service revenue went up 1.4% year-on-year to S$612.9 million. Net profit slumped 13.9% to S$101.5 million.

Let’s now turn our attention to the operational highlights for the quarter.

The number of postpaid customers went north by 40,000 to 1.27 million, when compared to the third quarter of 2016. However, the prepaid customer base declined by 26,000 to 736,000 during the same time frame.

Postpaid monthly average revenue per user (ARPU) declined 1.9% year-on-year to S$55.40 while prepaid monthly ARPU slumped 10% to S$10.80.

M1’s overall market share stood at 24.1%, as at the end of June 2017. This has grown steadily from 23.7% seen at the end of September 2016.

The monthly postpaid churn rate (the rate of customers leaving) rose to 1.3% in the latest quarter, up from 0.9% seen in the same quarter one year back.

Average postpaid smartphone data usage grew to 4.2GB per month in the latest quarter, from 3.4GB per month a year ago. Mobile data revenue increased 1.7% year-on-year to 55.9% of service revenue in the latest quarter. This is an improvement from the figure of 54.2% seen one year ago.

The increasing demand for data is something M1 would be capitalising on going forward. Karen Kooi, M1’s chief executive, said:

“With the shift in consumer preferences from traditional telecommunications to data centric services, we are addressing their changing needs through proactive customer service management, network optimisation and upgrades, as well as innovative and competitively priced service propositions.”

Over at the fixed services business, the fibre customer base grew by 20% year-on-year to 182,000. The monthly fibre ARPU, however, declined 6.1% year-on-year to S$42.90.

Last but not the least, international retail minutes fell 11.2% year-on-year to 155 million minutes. This caused a 7% drop in international call services revenue to S$13.9 million for the latest quarter.

Shares of M1 opened at S$1.79 this morning. This translates to a trailing price-to-earnings ratio of around 13 and a dividend yield of 6.2%.

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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 Sudhan P doesn’t own shares in any companies mentioned.