SingTel – CIMB

Weak across the board

Below expectations. Annualised 1HFY09 core net profit was 5% and 15% below our estimate and consensus expectations respectively, as we had flagged earlier. This was due to a weaker A$, higher subscriber acquisition and retention costs (SARC), and weak associate contributions. 2QFY09 core net profit fell 7% qoq and 12% yoy to S$801m, within our expectation of S$800m-820m. SingTel declared a DPS of 5.6 cts, unchanged yoy and representing a 51% payout, in line with its policy of 40-60%. Its DPS is in line with our forecast of 11 cts for FY09.

Weak across the board. Group EBITDA margins fell 2.3% pts qoq on sharply higher SARC, largely due to subsidies for the iPhone for both SingTel and Optus. Associate contributions fell 21% qoq predominantly due to Telkomsel’s weaker showing.

Lowered guidance. As expected, SingTel guided down its expectations for FY09. Group revenue and EBITDA “will be negatively impacted by depreciation in the Australian dollar” compared with expectations of growth previously. Also, associate contributions will be lower yoy vs. low double-digit growth previously.

Maintain Underperform. We are maintaining our forecasts and sum-of-the-parts target price of S$2.37 pending a conference call this morning. We expect to cut our FY09 estimates after the call. Reiterate UNDERPERFORM on the back of the weak results.

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