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Is M1 a falling knife?

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Sometimes, life is stranger than fiction. In my years of investing in SGX stocks, I have come across many investors who persisted in buying more shares of companies whose business fundamentals turned sour. Perhaps they did not have the time to read the financial reports or maybe they just lack the competence to do a proper due diligence. So in M1 case, is it a case of catching a falling knife?

When investing in stock, never just study the trend of the share price. This is especially so if you consider yourself to be a long-term investor.

Recently, several financial bloggers purchased M1 shares on the basis that the shares had reached a “break-through” level. Whether they had made the correct decision is subjected to debate. After all, there is no right or wrong in the stock market. The only thing that matters is whether you have made money from the stock investments.

In my point of view, I would avoid investing in M1 shares at all cost. And the latest financial results vindicated that business fundamentals of M1 continued to slide.

Full year net profit for FY2017 amounted to $132.5 million, a decrease of 11.5% year-on-year. Operating revenue for mobile telecommunication services, M1’s biggest revenue contributor, was $642 million, comparable to last year’s $640 million. International call services continued to decline, with revenue at $55.9 million, a decrease from last year’s $61.3 million. The saving grace for M1 revenue was the fixed services, with revenue of $129.7 million, an increase from $104.2 million.

M1

The lost decade

While the latest results were nothing disgraceful, they illustrated how far the Singapore telecommunication player has fallen for the past 10 years. To put things into perspective, the operating revenue from mobile telecommunication services in 2007 was $600 million. In comparison, the management has grown the revenue from this segment to just $640 million. During this period, operating expenses increased explosively from $600 million to the current $900 million.

But the most obvious decline was the revenue from international call services, which used to be the biggest cash cows for Singapore’s telecommunication players. [The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

 

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Updated: February 10, 2018 — 3:15 pm

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