SingTel – CIMB
Getting due credit
• Safe-haven exposure to high-growth markets. SingTel’s diversified earnings base, liquidity and exposure to the world’s fastest-growing mobile markets offer a unique investment proposition in an uncertain market environment.
• Cheaper, more liquid exposure to Telkomsel. Based on the current prices of Singtel’s other associates and our fair valuation of Singtel’s Singapore operations, Telkomsel is trading at an implied 12.5x CY08 P/E. This is at a 20% discount to the current 15.5x CY08 P/E for Telkomsel, based on PT Telkom’s current share price.
• Bharti has scope for upside surprises on robust subscriber adds. Bharti continued to gain the largest share of new subscribers and outpace industry growth in August. Bharti is firmly on track to meet consensus estimates at August’s netadds rate of 2.05m/month. Bharti’s net adds per month increases at an average 54k/month in the past year, setting the stage for upside surprises.
• Maintain Outperform with higher target price of S$4.27 (S$4.05 previously). Our sum-of-parts-valuation has been raised primarily on a higher target price for Bharti (based on consensus target price) and changes in currency assumptions. Our earnings have been raised by 1% for FY08-10 to reflect earnings upgrades for Bharti, based on consensus estimates. Key catalysts could continue to be increased market preference for reliable earnings growth tied to structural domestic consumption and liquid exposure to high-growth mobile markets. SingTel remains our top Singapore telco pick.