New | Hong Kong mobile operator SmarTone expects steady gains ahead after posting 74pc profit jump
Revenue for the year to June climbs 41pc to beat estimates
SmarTone Telecommunications Holdings, the No 3 mobile network operator in Hong Kong, expects service revenue and handset sales to continue their steady rise, after posting a 74 per cent jump in net profit for the year to June.
Interim chief executive Stephen Chau Kam-kun said on Tuesday after the market closed the company's strong earnings, healthy cash position, stringent cost control and innovative new services "provide the foundation for future growth".
SmarTone, a subsidiary of Sun Hung Kai Properties, reported net profit of HK$935 million, up from HK$537 million in the previous fiscal year.
Revenue climbed 41 per cent to HK$18.6 billion from HK$13.2 billion.
Those results beat Barclays' estimates of a 68.2 per cent year-on-year increase in net profit to HK$904 million and 17.8 per cent revenue growth to HK$15.6 billion.
Earnings before interest, taxes, depreciation and amortisation - a measure of a firm's operating profitability - rose 14 per cent to HK$2.9 billion from HK$2.5 billion. This was in line with Barclays' forecast.
Chau mainly attributed SmarTone's bumper results to a 3 per cent increase in mobile service revenue, 4 per cent more subscribers, and a 67 per cent expansion in smartphone and accessory sales.
He added that SmarTone's cost controls enabled it to rein in operating expenses, which grew 3 per cent.
Anand Ramachandran, the head of Barclays' telecommunications, internet and media equity research for Asia, excluding Japan, said in a report there was continued strong demand for Apple's iPhone 6 and iPhone 6 Plus handsets, which were made available from September last year.
Smartphone and accessory sales reached HK$13.1 billion, up from HK$5.3 billion a year earlier.
Chau declined to speculate on the rumoured release later this month of Apple's new iPhone 6s and 6s Plus models.
"We'll know in the next few weeks. I believe these will be very popular models in the market," he said.
Service revenue advanced to HK$5.6 billion from HK$5.4 billion in the previous year, but was offset by lower roaming service revenue caused by shrinking voice and text messaging traffic.
Subscriber numbers, however, swelled to 1.96 million. Post-paid monthly average revenue per user stood at HK$294.
"SmarTone, in our view, is benefiting the most from the subscriber migration to the higher tariff plans that were instituted in the fourth [fiscal] quarter last year," Ramachandran said.
Patrick Chan Kai-lung, an executive director at SmarTone, said the company's board raised the dividend payout ratio to 75 per cent of net profit, up from 60 per cent a year earlier, based on the healthy balance sheet, strong operating cash flow and conclusion of the city's 3G spectrum renewal auction in December.
SmarTone's share price rose 2.73 per cent to close at HK$14.28 on Tuesday. The stock has outperformed the Hang Seng Index in the past three months.
