SingTel – DBS

Strong Bharti earnings neutralized by exchange rate

Story: Bharti delivered strong earnings growth of 34% y-oy compared to our expectations of 30% growth. However, Indian rupee has weakened about 15% Y-o-Y with respect to Singapore dollar compared to our estimate of 10%. As such in Singapore dollar terms, Bharti’s earnings are inline with our forecasts.

Point: The main surprise in Bharti’s results came from stronger than expected top line growth of 44% Y-o-Y compared to our expectations of 32% growth. This was due to (a) strong subscriber addition of 2.5m per month compared to our estimate of 2.2m subscribers per month
and (b) Lower than expected ARPU decline of 2% Q-o-Q compared to our estimate of 3% decline.

Relevance: Local currencies of Thailand, Indonesia, and Philippines have declined about 14%, 10% and 4% Y-o-Y with respect to Singapore dollar till date. Since regional associates account for more than half of the total group earnings, we believe that SingTel’s earnings growth would
be limited to mid-single digit in the upcoming set of 1QFY09 results on 12th Aug 08. We maintain HOLD for SingTel with our SOTP based target price of S$3.75.

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