Published December 11, 2008

M1 seen maintaining dividend payout

This despite expecting a fall in its net income due to keen competition

By WINSTON CHAI

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A DECLINE in MobileOne's profits may not translate to a lower dividend payment for financial year 2008. Market analysts are, in fact, expecting the operator to maintain or even better its payout from last year.

M1, which registered a 4.4 per cent rise in net profit for FY2007, has said that it expects to register a 'single-digit' drop in net income for this year as it continues to reel from the impact of keen competition and higher customer acquisition costs.

OCBC Research, however, is projecting a more drastic drop of 14.4 per cent in M1's full-year net income to $147.1 million on the back on a sales tally of $796.5 million.

And with the operator pledging to pay out at least 80 per cent of its net profit as dividends in 2008, the decrease in earnings should translate to a lower payout this year from the 16 cents that it allocated in 2007.

However, that may not be the case. 'We are still expecting M1 to pay out pretty decent dividends. It's likely to be higher than 80 per cent this year to at least match last year's absolute amount,' said OCBC analyst Carey Wong.

The operator has announced an interim dividend of 6.2 cents for the first six months this year and it will need to pay a final dividend of 9.8 cents in the second half for its track record to remain intact.

M1 did not confirm if this will be the case. 'All relevant factors will be reviewed and taken into consideration in determining the actual dividend payout and this will be announced together with the financial results for 2008 in January next year,' a company spokesman said.

Rival StarHub, however, yesterday reaffirmed its promise of paying investors 18 cents in dividends per share this year amid the worsening economic climate, up from 16 cents in 2007.

'There is no threat to that commitment,' StarHub spokeswoman Jeannie Ong stressed.

SingTel also said that it has the option of adjusting its guidance to maintain its dividend payout.

It has committed to paying 45- 60 per cent of underlying net profit as dividends but its full-year earnings could be hurt by continued foreign exchange losses and the underperformance of some of its overseas associates.

These concerns prompted shareholders to query SingTel on the impact to its payout per share for the current financial year at its Investor Day event last week.

'The telco industry's yield of 8.6 per cent compares favourably against the market's average of 5.9 per cent. Given healthy cash flows, the companies should have the capacity to continue with rich payouts, particularly M1 and StarHub,' noted Terence Wong, co-head of research at DMG & Partners, in his recent client note.