SingTel – OCBC

Relatively upbeat 3Q10 results

Upbeat 3Q10 results. SingTel has released a relatively upbeat set of 3Q10 results this morning, with revenue up 20.2% YoY and 8.5% QoQ at S$4449.8m, driven by steady growth from Singapore and Australia and assisted by the stronger AUD, while net profit climbed 24.0% YoY and 3.6% QoQ to S$990.7m. Excluding exceptionals, underlying net profit rose 18.2% YoY and 4.0% QoQ to S$990.3m. Associates’ earnings contribution also put in a strong 39.5% YoY jump (though down 1.5% QoQ) to S$459.5m, thanks to a sharp improvement in Telkomsel’s performance and the associates’ fair value gains on forex adjustments. 9M09 revenue rose 9.1% to S$12400.3m, meeting 84.1% of our FY10 forecast, while net profit was up 13.6% at S$2892.1m; underlying net profit climbed 15.7% to S$2887.3m, meeting 83.5% of our full-year estimate.

Stable Singapore showing. Singapore operations put in a stable showing as guided. Revenue grew by 1.5% YoY and 6.1% QoQ to S$1530m, which also included S$55m revenue from the fibre rollout (vs. S$14m in 1QFY10 and S$31m in 2QFY10). Mainstay mobile business jumped 8.8% YoY and 5.7% QoQ, after adding another 81k of new subscribers for the quarter. Its fledging mio TV service also added another 29k users, bringing total subscribers to 155k; numbers are expected to increase after mid-2010 with the start of the EPL broadcast. Overall operational EBITDA margin slipped from 38.6% in 2QFY10 to 37.9% in 3QFY10, but still in line with its EBITDA margin guidance of 36-38% for FY10. It expects its EBITDA to grow at low single-digit level and other guidances also remain unchanged.

Improving Australia operations. SingTel’s Australia business saw a 4.8% YoY (+3.8% QoQ) rise in operating revenue to A$2302m, again aided by decent mobile revenue growth (+9.6% YoY, +5.6% QoQ), which contributed 63% to total revenue; its contribution to EBITDA was also higher at 68% vs. 67% a year ago. For the rest of FY10, SingTel expects Australia’s operating revenue and EBITDA to grow at low singledigit levels; capex at around A$1.1b; and free cashflow to be stable.

Maintain BUY and S$3.51 fair value. For its associates, SingTel expects both Bharti and Telkomsel (its two largest contributors) earnings to grow in local terms, although it notes that ordinary dividend will be lower. We are raising our FY10 revenue by 7.1% and earnings by 3.1% in view of the better than-expected 3QFY10 showing. But our SOTP fair value remains at S$3.51 and we maintain our BUY rating.

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