Does M1 Deserves it Current Predicament?

Many months ago, I calculated the book value per share and debt-to-equity, as well as ROE of the three telcos, and surmised that the balance sheet of Singtel is the strongest of them all. It was also the cheapest company based on book value per share.

I shared this little piece of information to a forum and was pointed out, by a rather senior member of the forum, that Starhub was trading at a huge price over its book value because most of its assets had been written down to zero. Part of them could be the cable business.

As such, I shelved my interest in all telcos, but recognize the attractive dividends that Starhub and M1 paid to their shareholders. However, Singapore is a small market for a mature industry.

Recently M1 announced a dramatically decrease in revenues compared to its quarter last year. I think perhaps a comparison over the Return of Invested Capital (ROIC) over a period of 10 years would be a fairer means of checking which is a better telco, since their balance sheet composition are, possibly, vastly different.

My method of calculating ROIC would be

taking Net Operating Profit after Tax (NOPAT), without taking into account interest charges,
and taking this sum,
divide by Invested Capital, which is all Debts + Equity

M1's annual reports are available at
https://www.m1.com.sg/aboutm1/investors/annualreports

and the figures used would be from 2006 to 2015, in thousands unless specified.

2006
NOPAT = 174839
Invested Capital (IC) = 631968
ROIC = 27.67%

2007
NOPAT = 171801+ 9472 = 181273
Invested Capital = 201,911 + 250,000 + 35,000 = 486911
ROIC = 37.23%

2008
NOPAT = 157687
IC = 473232
ROIC = 33.32%

2009
NOPAT = 156764
IC = 525113
ROIC = 29.85%

2010
NOPAT = 162901
IC = 618894
ROIC = 26.32%

2011
NOPAT = 170021
IC = 625847
ROIC = 27.17%

2012
NOPAT = 151991
IC = 619914
ROIC = 24.51%

2013
NOPAT = 164665
IC = 645096
ROIC = 25.53%

2014
NOPAT = 179821
IC = 696570
ROIC = 25.82%

2015
NOPAT = 183400
IC = 767013
ROIC = 23.91%

2016 (3 quarters announced so far.)
NOPAT = 117.9M + 4.7M = 122.6M
IC = 772.4M
In order for M1 to maintain last year ROIC,
Assuming it maintains its debts and equity,
it must post 62.08M of profits in the last quarter this year...

One would take note that it was performing well in 2006-7, and dip dramatically from 2008-10, didn't perform too badly between 2010-4, but started sliding down for the last two years.

In summary, this year's ROIC could well be the worst performing year for M1 in a decade. Perhaps, in the next post, I will look at Starhub's.