11% of M1's re-contracting clients upgraded postpaid plans

Stable earnings are predicted.

According to Phillip Securities, M1 is expected to register stable earnings and generate adequate Free Cash Flow. Rational competition in Singapore ensures this.

"We are encouraged by management’s guidance this quarter that 11% of re-contracting customers upgraded to higher tiered postpaid plans," Phillip Securities said.

Here's more from Phillip Securities:

9% of customers also continue to exceed their data allowance. While M1 has not indicated interest in following SingTel’s expected increase in excess data charge to S$10.70, we think it likely for M1 to do so.

The Telco counters, including M1, continue to offer attractive yields of 4.6%. Weak global economic data in recent months, which were below market’s already-lowered expectations, have also reduced possibility of an earlier spike in Fed rates before CY2015.

Equities are also likely to be a better inflation hedge as compared to bonds.

While investors previously demanded higher dividend yields, recent share price performances of the Telcos suggest that investors are increasingly accepting lower dividend yields.

Furthermore, the stable earnings and FCF decreases risk of a reduction of dividend payouts.

While an increase in US Fed rates continues to be a potential downside catalyst, as investors demand higher returns, we expect share price to be stable.

This is because investors may face inertial to switch portfolio, thus resulting in a lower sell-down rate and lesser downward pressure. The increase in earnings visibility also reduces its equity risk premium, thus justifying a higher share price.

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