SingTel – AmFraser

Favourable forex rates boosts results further

SingTel’s 3QFY10 results came in ahead of expectations. Net profit surged a strong 24% YoY to S$991mil, with underlying net profit (i.e. excluding exceptionals) at S$990mil – a strong 18% YoY growth.

Results were largely helped by favourable forex movements from a strong Australian dollar, which appreciated 27% YoY. This helped contribution from wholly-owned Optus in Australia to jump 48% to S$210 in net profit. Optus accounted for 21% of group net, up from 18% a year ago.

Besides help from forex rates, SingTel’s core operations also performed well. Its operations in Singapore grew net profit by 7%, making up a third of group earnings. At the same time, Optus enjoyed a healthy 15% YoY net profit growth in local currency terms.

Mobile segment was a key driver, largely due to strong iPhone take-up. Mobile accounted for 42% of group revenues. Second key segment was data and Internet, which grew 15% YoY and made up 19% of revenue.

Despite stiff competitive pressures in its mature markets, EBITDA margins maintained – 37% in Singapore and 23% in Australia.

Contributions from associates jumped 22% YoY to S$592mil, and accounted for 44% of EBIT. This was mainly due to a turnaround in Telkomsel’s (Indonesia) earnings combined with a 6% YoY appreciation of the Indonesian Rupiah. Telkomsel thus accounted for 40% of associates, while Bharti made up another 40% – with a 7% YoY increase in contribution.

We maintain our forecasts, as well as fair value (FV) at S$3.05/share. With the stock trading around FV, we are maintaining our rating at HOLD.

Free cash flows remain strong, supporting our expectation of DPS at 12.5 cents Singapore for full year. A 6.2 cent DPS was paid out for 1HFY10. While management guides for slightly lower cash flows for Singapore and dividends from associates – this will be offset by higher translated cash flows from Optus.

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