After a string of favorable Analyst reports on M1 Limited we finally see UBS downgrading it, in line with my analysis here:
UBS downgrades M1 (B2F.SG) to Neutral from Buy, citing weak free cash flow, reduced likelihood of special dividend, limited broadband revenue upside when Singapore’s high-speed national broadband network rolls out in coming months, says Dow Jones.
UBS says free cash flow down 66% on year in 1H10 at $30 million due to increased working capital needs arising from sale of smartphones: “We expect M1’s cash flows to remain weak in 2H10 because the iPhone 4 will be launched on 30 July 2010 and capex is seasonally higher in 2H”.
Research house notes while national broadband network will open new revenue stream for M1: “The question is how well M1 will be able to execute” as gaining wireline subscriber market share from SingTel (Z74.SG), StarHub (CC3.SG) likely to be difficult. Sets target price at $2.17. Shares off 0.5% at $2.22.