2 biggest risks M1 must keep an eye out for

Is the market competition threatening them?

According to Barclays, wireless-centric M1 has the most to gain if tiered pricing starts to accelerate topline growth prospects; operating trends to date seem to bear this out.

The national broadband initiative drives a new revenue stream, although subscriber ramp up has been slower than expected.

Here's more from Barclays:

An 80% payout drives a solid 4.3% dividend yield and has room for upside surprise, given the solid balance sheet. However, the expensive valuation case leads us to maintain our Equal Weight rating.

We raise our DCF-based PT to S$3.15 from S$2.65, as we now incorporate higher top-line growth assumptions and roll forward the DCF valuation basis to YE14 from YE13. We use a WACC of 7.8%, and long-term growth rate of 0%, in turn implying a terminal-year FCF multiple of 12.8x.

Upside risks include: 1) higher-than-expected revenue and profit generation from NGNBN access; and 2) higher dividends through a higher payout, special dividends or a capital reduction.

Downside risks are: 1) additional costs involved in establishing the new revenue streams, driving short-term margin/profit weakness; and 2) higher market competition, driving ARPU down/acquisitions costs up and subsequently impacting profits.

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