Mobile One (M1) Fundamental & Intrinsic Value

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Base on Q3 2009 (end of Sept, 2009) financial report:

  • PE = 11.03
  • Current Price = 1.85
  • Dividend Yield = 7.24%
  • NAV = $0.26
  • Net Earning = 20% (21.3% in 2008)
  • Current Ratio = 0.23 (0.48 in 2008, Similar industry is 0.55). M1 borrowed S$292.5M in this financial year.
  • ROA = 18.68% (Base on 2008 Full Year)
  • ROE = 67.3% (base on 2008 Full Year)
 

Stock Background

  •  Historical high = about $2.268
  • Current Price = $1.85

Intrinsic Value Calculation

 PE Model
  • Fair value PE = 15, intrinsic value= $2.52 (base on EPS $0.16771)
  • However, M1’s historical high PE is 11 and never reach PE = 15 before. Thus, it is unrealistic to use PE = 15 to calculate the intrinsic value.
  • Base on PE = 11, intrinsic value (base on EPS $0.16771) = $1.84
  • EPS Growth Rate = 3.6%
  • PEG = 3.09 (Overvalue!)
 DCF Model
  • I am unable to calculate the intrinsic value because M1 Free Cash Flow is very inconsistent and have negative growth for past 3 years.
 Discounted EPS Model
  • EPS Growth Rate = 3.6%
  • Discount Rate = 5%
  • 2008A EPS = $0.16771
  • Intrinsic Value = $1.56
 Regardless of which method to calculate the intrinsic value, M1 is over value (base on Discounted EPS Model and PEG ratio). The top line (Revenue) and the bottom line (Profit) are not growing significantly year over year. M1 is also losing out to her competitors SingTel and StarHub on the TV bundling services. Furthermore, the stock price moves sideway since the IPO.
 

Summary of my reasons for not to buy M1:

  1. No significant competitive advantage to compete with SingTel and StarHub in the long term.
  2. Sales & Profit are not growing significantly.
  3. Stock moves sideway so no great upside potential for capital gain.

I am avoiding M1 after this analysis because there are other better Telco companies to invest in.

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Development Bank of Singapore (DBS) – Breaking out from the wedge?

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DBS is trying to break out from the wedge. It may also bounce back from the wedge resistance because there is no volume to support the breakout and go up to $14.7 target price.
DBS stock may go up in the short term because all Six Standard Technical Indicators show bullish strengths.
  • Stock price above 20D, 50D and 200D MA.
  • Stock price at upper Bollinger Band.
  • Stock price on top of Parabolic SAR.
  • MACD just had the crossover and stay on the upper half.
  • RSI is rising above 50 level.
  • Stochastic is rising and moving into 80 level.
 However, I am sticking to my original plan for not buying DBS now due to the following reasons:
  1. DBS is definately not at the low base on historical chart.
  2. The whole market is due for correction. STI index is not showing strength to break the 2700 resistance level. For the past few days, STI opened up and faced selling off in the evening. STI also did not show big response although DOW and S&P500 showed positive movement.
  3. DBS volume is dropping.
  4. Probability of going down is higher than going up.

My constant reminder to myself:

  • Buy Low Sell High
  • What comes down, must go up. What goes up, must come down.
So, I am not in the hurry. Furthermore, there are so many stocks for me to choose to invest. That’s the reason why I am doing so many stock analysis especially on blue chips recently.
Continue ReadingDevelopment Bank of Singapore (DBS) – Breaking out from the wedge?