Executive Summary

This report briefly talks about the financial performance and

financial position of ‘M1 Telecommunications’ with the help of their
balance sheets and income statements for past two years. Using
various types of ratios, this report indicates the profitability, efficiency,
liquidity, gearing and future investments of the financial statements.
Evaluating the financial statements through this ratios gives a clear
picture of the group’s financial withstand, its strength and weakness,
opportunities to improve and threats around which could positively
affect the business. It helps in review the business standards with the
competitors, so that necessary plans could be drafted and executed
to improve the business at respective places. Reviewing ones
financial report through respective ratios gives clear picture of the
sources utilised, unused resources or assets, company’s position in
terms of the creditors, etc. Let’s go through in detail description of the
ratios to know about the group’s performance & position.

I. Introduction

1. Purpose of the Report

 This report briefly evaluates the financial position and
business performance of M1 Telecomm. The report also analyses
financial ratios from the data obtained from three years annual report
of the group. This report interprets the information of the company’s
financial situation in order to review its business performance and
future investment.

2. Company Profile

2.1. History of the Group

M1 is a leading provider of mobile and fixed

communications services to over 1.9 million customers in Singapore.
With emphasis on quality, customer service, value and innovation,
M1 aims to brighten lives by linking anyone and anything; anytime,
anywhere.

For mobile services, M1 offers a wide range of voice, data and value-
added services on our nationwide Global System for Mobile
Communication (GSM) / 3G / High Speed Packet Access (HSPA)
network. Customers subscribe to its mobile services on either a post-
paid or prepaid basis through a variety of price plans.

M1 was the first mobile operator in Singapore to offer High Speed

Downlink Packet Access (HSDPA) in December 2006, with the
launch of 'M1 Broadband' - Singapore's first true island-wide wireless
broadband service, offering customers a variety of service plans at
different access speeds. Today, M1's mobile network is capable of
supporting downlink and uplink throughput speeds of up to 28 Mbps
and 5.76 Mbps respectively.

In the area of international call services, M1 offers mobile and fixed-

line customers International Direct Dial (IDD) services using prefixes
002 and 021, and an International Calling Card (ICC) service using
prefix 1818. M1 also sells international wholesale minutes to other
international service providers.
 For fixed services, customers can choose from various broadband
service plans with speeds ranging from 5 Mbps to 1 Gbps, including
fixed voice and other value-added services. In addition, M1 offers
managed and data centre services, cloud computing services and
other enterprise solutions for corporate customers. M1's services are
further supported by mFix, a remote technical support service for
computers and smart phones.

M1 is listed on the Singapore Exchange and its current major

shareholders are Axiata Investments (Singapore) Limited, Keppel
Telecoms Pte Ltd and SPH Multimedia Private Limited

2.2. Mission of the Group

To be an efficient and totally customer-focused company,

achieving the highest satisfaction for our customers, people and
shareholders.

To be the leader in personal communications, distinguished by

innovativeness and dedication to our customers, people and
shareholders.

2.3. Strategic Issues

The main issues facing M1 Telecom would be trying to

maintain its exceptional record of profitability and retain as much
market share after the introduction of competition. M1 Telecom would
have to achieve this in the midst of fast paced advancements in
technology, maturing customer tastes and a turbulent business
environment. Technological advancements, such as Internet
telephony, also begin to affect M1 profitability. Such technological
advancements not only offered customers more choices, but also
matured their tastes; demanding for more sophisticated (and
cheaper) services (i.e. calling rates). Being a cheaper alternative to
M1 Telecom’s international calling charges, Internet telephony
 enabled customers to bypass M1 Telecom’s network infrastructure
and allowed them to customize the services according to their
requirements (e.g. real-time billing – charged accordingly to the level
of service being used). M1Telecom would have to contend with
competitors in an intense industry environment in the midst of an
economically trying period, whilst facing challenges posed by fast-
paced technological advancements.

I. Financial Ratio Analysis:

1. Liquidity Ratios:

1.1.Current Ratio:
For each dollar of short term liabilities, PPHL is S$1.50 near
cash assets to meet those short term liabilities. The decline in 2008
doesn’t seems to have affected the ratio in 2009 as the group has
well utilized its liquidity and other revenues to stabilise itself for the
future. Comparing to its competitor Keppel, ST Engineering seems to
be on better side.

1.2. Quick Ratio:

Excluding inventory doesn’t make many changes in the values

which show current assets are easily convertible to receivables and
could be collected as per day’s receivable. Comparing to Keppel, ST
Engineering would be able to meet all those obligations faster.

2. Efficiency Ratios:

2.1. Average collection period:

 On basis of the information from the balance sheet, the
group takes an average of 82 days to collect its receivables from the
customer. This shows the ability of cash flow of the group to
withstand its investments and to pay off its obligations. Keppel takes
an average of 55days which also shows the stability of ST
Engineering in receiving its outstanding.

2.2. Inventory Turnover:

Comparing to its previous years ST Engineering has a

turnover of 6-11 times in a year of its inventories, which shows the
large amount of inventories. The competitor Keppel takes average of
3 times to rollover its inventory which reveals the large amount of
inventories. ST engineering seems to be on better position in terms
of inventory turnover as they could able to turn inventory faster.

2.3. Average Payment Period:

The information reveals that the group is taking 49days

to 53 days to pay off its debts to creditors. In 2009 the payment days
has decreased in order to retain its supplier chain in the recession
period. The competitor takes nearly 165 days to pay of its credits
which reveal the potential of ST engineering in generating its revenue
by selling its inventories.

3. Leverage Ratios:

3.1. Debt Ratio:

 In terms of debt ratio ST Engineering 75% of financing is from
debts while Keppel has 60% from debts which shows both the firms
rely on investors for generating capital.

3.2. Interest Coverage Ratio:

In terms of interest coverage both the firms are sound

enough to pay off their obligations, but still Keppel has higher value
than of ST Engineering. Keppel is able to cover its interest 21 times
in 2008 and 44 times in 2009 while ST is covering 10times in 2008
and 6times in 2009 which is not a bad sign but still its shows the
decline in revenue.

4. Profitability Ratio:

These ratios generally give stakeholders a good

understanding of how well the company has utilized its resources
and maximized the wealth of the owners of the business (Docstoc
homepage)

4.1. Gross Margin:

A high profit margin doesn’t assure overall profitability. ST

Engineering has 20 of gross profit which reveals that firm has the
ability to improve profits even without holding down non productive
expenses. STE is comparatively better than Keppel as it has
generated only 13%-15% of profit after expenses.
 4.2. Net Margin:

This profitability ratio reveals for every S$1, STE has earned
0.10cents in 2009 and 2009 which shows a good sign of returns to
stockholders while Keppel has generated 0.15cents which is better
than STE as their indirect costs are lesser than STE.

4.3. Return on Assets:

This ratio is true indicator of an investment’s value to investor

is the returns per amount invested. From every S$1 in assets that
STE had at its disposal, it was able to earn a return of more than
S$0.73cents in 2008 and 0.81cents in 2009. Comparing to its
competitor, STE profitability is in steady position as Keppel has earn
a return of S$ 0.10cents and 0.13 cents in 2008 and 2009
respectively.

4.4. Return on Equity:

The return to the investor is good in 2008 with 29% but

later in 2008 it declined to 27%.The overall view on the profit generated
by the group from on a better path; achieving 27% would be excellent
from investor’s point of view comparing to Keppel which has 19% profit.

5. Investment Ratio:

5.1.Earnings Per Share:

 The earnings per share value has declined in 2009 to
0.15cents from 0.16cents in 2008 Which is not a huge difference in
terms of shareholders view but comparing to Keppel, STE lacks behind
in the earnings provided to shareholders as Keppel generates good
earnings S$0.35cents in 2008 which is two times of STE and S$
0.61cents which is 4times of STE in 2009.

5.2. Dividend Payout Ratio:

This means that board of director made a decision paid

4% of net income to the shareholders in 2008 and 2009 because of
decreased net income or extra usage of net income. Keppel has
provided 35% of its income in 2008 and 61% of its income in 2009
which reveals that Keppel is stronger position in terms of investors as
they will expect for profit maximisation.

6. Media Information:

In most instances that responsibility falls squarely on the shoulders

of supposedly independent auditors. However, with intense competition
for large audit clients, and given the potential fee generation from such
long-term engagements, these accountants must face difficult ethical
questions if they want to both “do the right thing” and continue to maintain
their lucrative client relationships. Misleading financial statements can take
many forms. The errors or omissions may be relatively minor or they may
be significant. The problem, however, is that because of the multiple
 interests of those who rely on financial statements, even minor errors or
omissions can prove disastrous. Investors rely heavily on the objectivity
and integrity of those who prepare financial statements. When that
fiduciary bond is broken, and the reliability of financial statements is called
into question, any confidence that may have been invested in the reporting
system is destroyed.

7. Advantages of ratio analysis:

There are various advantages of financial statements analysis. The

major benefit is that the investors get enough idea to decide about the
investments of their funds in the specific company. Secondly, regulatory
authorities like International Accounting Standards Board can ensure
whether the company is following accounting standards or not. Thirdly,
financial statements analysis can help the government agencies to
analyze the taxation due to the company. Moreover, company can analyze
its own performance over the period of time through financial statements
analysis.

7.1.Limitations of ratio analysis:

Trend analysis of ratios provides better insight into a

company’s performance. However, it is important to be sure that the
assumptions applied in calculating the ratios are constant throughout.

Some ratios include items from the Income Statement and Balance Sheet,
such as Return on Assets, Inventory turnover and Receivable turnover.
While the income statement reports performance over a specified period of
time, the balance sheet provides a static measurement at a single point in
time. This point must be considered while interpreting the results of ratio
calculations. Year-end values in the Balance Sheet may not be
representative. Values of certain items in the Balance Sheet may increase or
decrease at the end of the accounting period due to seasonal factors, such
as accounts receivables and inventories. These changes may distort the
value of ratios. In these cases, it is more appropriate to use average values
during the given period of time.

Comparisons of ratios with different industries would be meaningless. For

example, comparing leverage ratios of stable utility companies with cyclical
mining companies would be useless. Similarly, the comparison of a cyclical
company's profitability with a relatively stable company would fail to give an
accurate long-term measurement of profitability.

Using historical financial data without understanding the fundamental

changes in a company's business strategy would predict very little about its
future prospects. For example, the historical ratios of a company that has
undergone a merger or had a substantial change in its technology or market
position would tell very little about the prospects for this company.

Lastly, ratios are subject to the limitations of accounting methods. Any

significant change in a ratio may also be due to changes in a company’s
accounting techniques. As long as the accounting techniques remain more
or less the same over time, meaningful inferences can be drawn by
examining trends in financial ratios. Experience suggests that financial
analysis works only if you are aware of accounting biases and makes
adjustments for them.

Conclusion:

Based internal financial analysis, it can be concluded that M1

Corporation has kept a rapid developing speed ever since the difficult time
of global economy as the financial ratios reflects. The ratio figures show
exactly how well M1 is in respect of its financial position and performance.
Actually, the healthy situation the company stands promises itself to be
more and more profitable and competitive in Singapore telecom industry
and also owns a strong attraction to potential investors. In a word, the
financial position and performance are presented positive, which surely
guarantees a bright future and strong financial standing has well
contributed to the growth of M1.
M1 keep communications industry leadership; continue to devote to
provide quality service to our customers in good financial capacity. M1will
continue to expand the market. In addition, the company will further
strengthen its business. Finally, unpredictable, in changing and
competitive environment, M1 will use its financial strength and continue to
focus on long-term growth. M1 will be focused on growing the group
further and they remain committed to build up three key business thrusts
of Sustaining Growth, Empowering Lives and Nurturing Communities.
Meanwhile, they will also to focus on what they do best. M1 income
declined by a large-scale personnel cost which is a great burden,
especially in the circumstance of economic recession. Therefore, effective
system of M1 must establish the connection between the employees
incentive and group performance. Rather than fixed number of salary such
as employee performance or bonuses etc.M1’s solvency is the best, in this
analysis of financial leverage ratio, it is found that the company is very
high after the debt, solvency is also very high. Although higher debt
increased interest rate volatility risk and cash flow, but provides a team
and financial flexibility to seek better business opportunities.