M1 Ltd (B2F)

Telco has been deemed as a defensive sector. However, there are challenges ahead that has to be addressed before labelling it as a 'safe' investment.

Today I will look at M1 Ltd in the context of the Telco industry, as one of my friends mentioned that it is trading at a low now.

Financials

Price	2.38
52 wk range	2.19 - 3.55
Payout Ratio	80.53%
Earnings Yield	7.98%

Expected Dividend Yield: 6.43%

Trends

• ROC has been stable at around 20%, a good sign.
• Revenue has reported an increasing trend
• But Operating CF has been falling
• D/E increasing, hovering high at 80%
• Payout Ratio around 100%, dividends may be unsustainable.

Challenges

• M1 is in a net debt position with its FCF falling below its dividend payout.

Opportunities

• Partnership with Circles.Life. Read about the plans it offers here. 

Verdict

The dividend yield is at 6.43% and (an irrational me want to buy). The dividend of 15.3 cents used in the calculation is a conservative estimate, and may be achievable. 

Yet, the Cashflows are bad.

We can see that FCF per share is 11.3 cents while the cash distribution is 15.3 cents. 

A conservative outlook will be a FCF per share of 11 cents, and an adjusted sustainable dividend of 11 cents.

Adjusted div yield = 11/238 = 4.6 percent

Target Price: 11/5 percent = $2.20

Looks like I wont be buying M1. 

However, an interesting note is that 52% of the brokers have a 'Buy' rating. They include

• Deutsche: $3.90
• RHB: $3.20
• Maybank KE: $3.09

Only CIMB ($2.40) and Credit Suisse ($2.05) dont argue for a 'Buy'.