SingTel – Phillip

Better-than-expected Results

2Q Results. SingTel reported 2Q operating revenue of S$3,695m (+10.9% yoy) and net profit of S$988m (+3.3% yoy). Moreover, EBITDA increased to S$1,742m (+2.3% yoy). The better-than-expected results were mainly attributed to the strong performances by SingTel and the regional associates.

In view of the excellent performance, SingTel announced an interim ordinary dividend of S$891m or 5.60 cents per share (+51.8% yoy).

Strong Performances. In Singapore, SingTel continued to post double-digit revenue growth due to success in its growth segments such as mobile communications, data and internet as well as IT and engineering. Moreover, in Australia, Optus achieved a slight increase in operating revenue of 3.7 percent to A$1.93 billion despite a highly competitive market.

The regional mobile associates also posted better-than-expected results for the quarter. Pre-tax earnings gained 21 percent to S$600m while post-tax earnings increased 21 percent to S$477m. These results were due to the better performances from Bharti Telecom Group.

FY 2008 Outlook. Management remains optimistic about its business in 2007. In Singapore, operating revenue is expected to grow at single-digit level and capital expenditure to revenue ratio is expected to be in low double-digits. The revenue growth for Optus is likely to be to 2.5 to 3 percent and capital expenditure is approximately A$1.1 billion.

Meanwhile, the pre-tax profit contribution from the regional mobile associates is expected to grow at double digits levels and cash dividends from associates are likely to increase.

Maintain BUY recommendation, target price raised from S$3.90 to S$4.22. SingTel is definitely a BUY for investors. This is because it pays good dividends. Moreover, its business continues to grow in Singapore and Australia with strong contributions from its regional mobile associates. The stock has performed well after the market correction in August 2007.

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