SingTel – AmFraser

Three regional pillars performed well

• 1HFY10 net profit came in at S$1.9bil as we expected. Overall, a good performance with net up 10% YoY for the interim as well as for the quarter. All three pillars – Singapore operations, Optus in Australia and its group of associates – did not disappoint.

• Net profit at Optus grew a healthy 17% YoY in local currency terms, while Singapore operations grew 9%. Total associate contributions surged 20% to S$1.25bil pretax, which is half of group earnings.

• Mobile was a strong driver for the group, helped by distribution of iPhone and increased take-up of wireless broadband. Even in saturated Singapore, SingTel added 20,000 net subscribers/month, while Optus did better at over-70,000. At the same time, ARPUs in 2Q10 maintained at 1Q10 levels.

• In the corporate segment, ICT and managed services is a key driver with continued contract wins for Optus and Singapore operations.

• The key driver for associates this year is Telkomsel Indonesia which contributed 25% more YoY to SingTel. Telkomsel is on a recovery path from a price competition in FY09. But a weaker 2QFY10 for Bharti has led to consensus downgrades which tweaks our SingTel FY10 forecasts lower.

• But our FY11F and FY12F are marginally raised, mainly on back of a stronger A$ which will aid in translation of Optus’s contribution. We have applied a revised rate of 1.25 from 2H 2010 onwards, compared to 1.17 previously applied.

• Management continues to guide for single-digit growth for topline as well as for EBITDA growth. We forecast FY10 net to grow 16% YoY to S$4bil, thereafter at 6% growth in FY11 and 4% in FY12 on constant currency rates.

• We are maintaining our HOLD rating with fair value at S$3.05.

• SingTel also declared an interim dividend of 6.2 cents Singapore; for 1HFY09, 5.6 cents was declared.

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