SingTel – DBSV

Next special dividend could be 3 years away

At a Glance

4Q11 underlying profit of S$998m (-2.4% YoY, +3QoQ) was inline with consensus. Strong Optus offset disappointment from associates.

Proposed special DPS of 10 Scts after 4 years wait. Final DPS of 9 Scts (plus interim DPS of 6.8 Scts) translates to 66% payout ratio.

Next capital management could be 3 years away. 70% earnings payout ratio may not be very attractive in our view.

Comment on Results

Strong Optus offset disappointment from associates. Optus’ 4Q11 net profit of A$261m was up 54% QoQ versus our expectation of 30% mainly due to sequential decline of A$25m (S$32m) in outpayment and leasing costs thanks to stronger AUD versus USD and write back of a one-off provision. This offset the weak earnings contribution from associates Bharti & Telkomsel.

Management guidance for FY12F brings no surprises.

(a) Stable EBITDA for Singapore (1.6% decline in FY11) and capex of S$900m (S$726m in FY11). This is slightly lower than our estimate of 2% EBITDA growth. (b) Low-single digit growth in EBITDA for Optus (8% growth in FY11) and capex of A$1.2bn (A$1bn in FY11). This is broadly inline with our estimate of 4% EBITDA growth. (c) No concrete guidance on pre-tax profit for associates as usual (10% decline in FY11). We estimate 9% growth for associates.

With 3% earning growth in FY12F, investors might appreciate regular yield north of 6%. SingTel declared a special dividend of 10 Scts after a gap of four years taking total FY11 dividend yield to an impressive 8%. However, SingTel reviews capital management potential every 3 years, implying 3 years wait for next special dividend. We maintain HOLD as regular dividend yield of less than 6% is not very attractive.

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