SingTel – Phillip

Company Overview

SingTel (ST) is a leading communications service provider with diversified geographical exposures. The core part of SingTel’s business resides in Singapore & Australia, while meaningful stakes in its regional Associates provides the Group with exposure across Asia-Pacific.

  • Underlying net income stable y-y at S$886 million
  • Guidance on Optus revenue revised downward to negative mid-single digit levels
  • Group EBITDA guided to remain stable
  • Unchanged Interim DPS of 6.8cents
  • We rate SingTel as Neutral with new TP of S$3.06

What is the news?

SingTel reported 2Q13 underlying profits of S$886 million, increasing 0.1% y-y. Management revised its guidance on Australia from low single-digit revenue growth, to negative mid-single digit revenue decline, as it focuses on improving customer experience and yield, in the challenging environment. However, EBITDA is expected to remain stable on a Group level, in Singapore, and in Australia. The Group’s 30% equity interest in Ward has also been reclassified as “Asset Held for Sale”. An unchanged interim dividend of 6.8 cents per share was also declared, representing a 62% payout of current 1H13 earnings.

How do we view

2Q13’s earnings were below our expectations on weaker revenue from Optus, mitigated by good cost management. While guidance was lowered, we note the rather resilient performance, while potential earnings surprise may arise from improved data monetization, contributions from Digital Life, and SingTel’s associates.

Investment Actions?

We factor in 2Q13’s earnings, together with management’s downward revision of Optus revenue guidance. We derive a new Sum-of-the-parts (SOTP) target price of S$3.06, and maintain our “Neutral” call.

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