M1 - The First Trial On A Blue-Chip

I will be using M1 as the first company to test my Triple S Scorecard.

Profile In Short

If you do not know what M1 does or is, you do not know Singapore enough.

In simple terms, M1 is still one of the only 3 telecommunication companies in Singapore.


Based On Triple S Scorecard:




Why So Good?

Defensive Stock - Telecom Companies are deem as defensive stocks, due to their business model. It will always have business and its customer are locked up with them for at least 2 years (due to signing up a 2 year mobile plan with M1).

1 of the only 3 Established Telecommunications Company in Singapore - Despite announcement of a 4th Teleco coming along the way, it has been stated widely that M1 may AT MOST LOSS 20% of the revenue. This is due to the fact that Teleco industry has a high barrier to entry. Having established in Singapore for such a LONG TIME, M1 already an established infrastructure.

High Dividend Yield, Dividend Payout Company - M1 is a company that promises high dividend payout (at least 80%) and as per Triple S Scorecard, based on the current price, it is also provides a high dividend yield of at least 8%.

Strong and Consistent Earning Power - M1 has been able to achieve a high profit margin over the last 5 years. Over the next 2 years, its earning maybe impacted. But I believe it will still be in the range of 10%.

Why So Bad?

Singapore Mobile Population Penetration Rate - In June 2014, the penetration rate is 153.9% - Which meant each person has about 1.5 mobile line. How many mobile does 1 person need? Thus, the market seem saturated at this moment. Rather than getting more customers, M1 has to protect its current customers from changing mobile providers.

Low iPhone Subsidies - This is just an observation. It seems that IPhone subsidies for 2 year mobile plans seem to be at a low. Their handset price for a minimum amount (below $50 per month) is higher than Singtel or Starhub.

Weak Balance Sheet - From the Triple S Scorecard, the company has a weak balance sheet. This should not be different from Singtel or Starhub. How the company will perform in the stock market will be determine by its earning power.

In Short

I did not go into detail of the earning when I was inputting the details. Thus, this analysis was done very quickly. Nevertheless, the analysis allowed me to understand that M1 stock price should be based solely from its earning power/business model and not its asset value. This should be the same for other blue chips as well.

Looking at the analysis of the earning power, a price of 1.75 should be a great price to enter (Average 5 year PE will be below 10 & PS will be below 1.5).

Current Price: 2.240 as of 26 Jan 2016

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

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