M1's share price edged up 6.9% on Monday

The rise was amidst a strategic review by its big shareholders.

After Bloomberg News reported last Friday evening that M1 Ltd’s (M1) three substantial shareholders – Keppel Telecommunications & Transportation (KPTT), Axiata Group (Axiata), and Singapore Press Holdings (SPH) – are conducting a strategic review of their respective 19.2%, 28.5%, and 13.4% stakes, OCBC said that M1’s share price has since risen 6.9% to close at S$2.17 yesterday.

M1 also announced the same evening to clarify that there is no assurance any transaction will materialize from such review.

Here’s more from OCBC:

Looking ahead, we expect M1’s earnings to decline amidst challenging operating environment with the 4th telco entry.

And if no transaction materialises out of this strategic review, we expect M1’s share price to decline significantly towards S$1.75, a value that we derived purely based on its fundamentals.

All said, we are not ruling out the potential sale of the three substantial shareholders’ combined stake of 61% after the strategic review, which under SGX rules, will trigger a general offer for the remaining shares of M1.

Assuming a takeover happens, we believe the valuation of M1 could be in the range of S$2.27-S$2.62 per share, based on EV/EBITDA multiple of 8-9x, applied to the average of M1’s FY17 and FY18 EBITDA.