Compiled by Jamie Lee,
The Business Times
M1 | NEUTRAL
MARCH 20 CLOSE: $2.17
TARGET PRICE: $2.05
RHB RESEARCH, MARCH 20
We do not rule out a potential M1-StarHub merger - a move that would allow both telcos to pit their respective strengths to fend off the threat from a fourth mobile entrant (TPG).
We think a merger makes sense as M1 is viewed as the weakest of the three telcos in Singapore.
Given its dominant mobile exposure (more than 60 per cent of revenue), a merger could address commercial challenges; there are revenue synergies (better cross-selling/bundling opportunities for M1 which does not offer a quad-play service) and cost synergies (network, sales & distribution, capex etc).
Both telcos are in talks for potential network sharing; and the shareholders of both entities can consolidate their stakes in a bigger and more formidable outfit that would be in a better position to compete with Singtel and TPG Telecom.
KEPPEL CORPORATION | BUY
MARCH 20 CLOSE: $6.85
TARGET PRICE: $7.40
OCBC INVESTMENT RESEARCH, MARCH 20
Pay day from Keppel T&T? In our sum-of-parts valuation, Keppel T&T accounts for about 5 per cent of Keppel Corp's value, and we do not expect a significant impact on Keppel Corp's fair value estimate of $7.40 should an M1 sale materialise.
The impact would be more greatly felt at the Keppel T&T level, and the market may eye any potential special dividend, given that 1) Keppel T&T's stake in M1 is worth about $390 million at current prices, and 2) Keppel T&T also announced on the same day that it will sell its entire 10 per cent interest in Asia Airfreight Terminal Company for HK$250 million (S$45 million).
However, a special dividend would be beneficial to Keppel Corp in terms of cash flows.
SINGAPORE PRESS HOLDINGS | HOLD
MARCH 20 CLOSE: $3.55
TARGET PRICE: $3.39
DBS GROUP RESEARCH, MARCH 20
Since our downgrade from "hold" to "fully valued" in April 2016, the stock has fallen by more than 12 per cent.
Results had been lacklustre on the back of weak adex and GDP growth. This has also led to a dividend per share cut from 20 cents in FY15 to 18 cents in FY16.
We are now less pessimistic on Singapore Press Holdings (SPH) as we believe valuations have largely priced in negatives and see some positives from the possibility of SPH monetising its M1 stake; and GDP acceleration from 2 per cent in 2016 to 2.8 per cent in 2017.
In addition, the recent relaxation of Total Debt Servicing Ratio framework to allow borrowers to borrow against their properties for additional cash could support private consumption and expenditure in the overall economy.
Dividend yield is decent at 5.1 per cent.
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