SingTel – CS

1Q09 results – Solid core results, currencies and Telkomsel caused net profit weakness

● Mobile Number Portability did not have a material negative impact on the Singapore business, and revenue and EBITDA rose QoQ; we expect this recovery to continue into subsequent quarters. Optus’s contribution was very much in line with our forecasts.

● However, total contribution from associates fell by 9.9% QoQ and 10.7% YoY. This very weak result came partly as a result of S$ appreciation, but was predominantly due to the 24.4% collapse in Telkomsel’s net profit in the quarter to June.

● We have cut the PBT contribution from associates by 9.5% due to currency amendments and our recently-revised Telkomsel forecasts, and this feeds through to a 5.3% cut in earnings. However, our DCF-based SOTP and target price are unchanged.

● Singtel did not announce any further capital management initiatives; it is possible that management are waiting for the announcement of the winner of the NetCo and OpCo bids for
Singapore’s Next Generation Network (NGN). In the meantime, the balance sheet remains strong. Outperform rating maintained.

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