M1 Third Quarter 2016 Results

M1 share price plunged 5.15% today, a $0.12 drop, to $2.21 today. This is much expected from the poor 3Q16 results released yesterday.
穷小子 mentioned in the previous post that M1 is having a juicy dividend yield of 6.38%, but because of fourth telco is approaching, patience prevails, and still waiting at the sidelines. Take a quick look on the 3Q2016 results.

Key Financial Highlights

Operating Revenue
$277.6m to $249.1m, -10.3%

Cost of sales for 9 months
$380.9m to $294.6m, -22.7%

Net Profit after tax
$44.9m to $34.4m, -23.4%

Cash & Cash equivalents, -62.9%

Net debt. 20.5%

Net debt/EBITDA, 24.8%

EPS, -12.0%

All these financial leverage are statistically bad.

Enough of the current statistic facts, let's see the good side of it.
As we all have known, majority of Singapore's consumers are bounded by the traditional 2 years contracts. Hence, the customer base is one of the most important factors to estimate the future, which at least how 穷小子 think.

Key Performance

Mobile Customer base

Mobile Market Share

Fixed services Customer base

Well, at least its 2 main business pillars', mobile and fixed services, base are increasing, at least at a slow pace.

Conclusion
Based on today closed price, the yield is about 6.9%, but of course, pretty much expecting a heavy cut to the dividends. Cut by how much is the big question for a dividend stock.
The management outlook are estimating a decline in FY2016 net profit after tax to be around the year-to-date range.
Assuming there will be a drop of 16% in EPS for FY2016, and the payout policy remains at 80%, we may be having a dividend of 12.8 cents for the next FY.

穷小子 is expecting few bad news to happen which can really hurt M1's share price deeply.
- News of fourth telco
- FY2016 results
- Cut in dividend
- Finally the completion of fourth telco (depending)

Hence not intending to average down in the near future. The first step which 穷小子 will be taking would be either wait for the price to hit at least $2.00 (psychological level), or after the fourth telco decision announced. Depends on whichever earlier.

Lastly, bear in mind that the worst fearful concern is that, there is still no confirmation about a fourth telco yet, there is not even a first step made by the fourth telco, but M1 profits is already dropped hard. Imagine what can this fourth telco do more hurting if it realised.

P.S. 穷小子 is not spreading fear here. M1 is about 10.9% of his total portfolio now.

What to do during this period?

What to do during this period?

Ever since the epic Brexit event, STI finally surged above 2,900 points to 2,945 unexpectedly, before coming down to 2,803 in the following month. Subsequently, it has been ranged bound between 2,800 and 2,900.

Those banks, telcos and REITs stocks in 穷小子's watchlists did not have much movements during this period as well. The announcement of delaying the rates hike in September didn't have much impact on the market at all, perhaps all are well within investors' expectations.

The price at current level is not high enough for 穷小子 to take profits, nor low enough for 穷小子 to add more positions. No dividends for September and October. Honestly speaking, this is boring, and 穷小子 did not pay much attention to the market during this period too.

All these may actually become a good time for investors to take a breath and do a review

穷小子 did the following:

• Re-valuate the valuations of those stocks in the watchlists.
• Based on the valuations, set the price alerts for each of them.
• Forecast dividend's yield and set targets for next year

After doing all these, the forecast for next year's dividend yield is pathetic, at a low range of 4%. Seems that telcos and REITs valuations could be more attractive now in order to increase the yield. Especially with M1 at a dividend yield of 6.38% on today's closing price, it could be an eye-catching.
Nonetheless, we must not forget that IDA is gonna make announcements regarding to fourth telco by the end of October, and rates hikes' decision will be made in December. These are the two major factors which will affect these two sectors respectively. Lastly, the much anticipated US President election will be around the corner as well in November.

Apart from all these, STI may continue to stagnant awhile, for at least after Chinese New Year which is Jan next year. Furthermore, the dividend seasons are pretty much over for this year.
These are all the reasons which why 穷小子 has not made his purchased yet. Patience ^^

穷小子 is almost 85% invested, hence this may be his last shot for any good bargains in the market.