SingTel – CIMB
Bharti’s the static on the line
9MFY13 core net profit met our forecast but missed that of consensus by 5%. Strength at Optus, Telkomsel, AIS and Globe was offset by disappointment at Bharti. SingTel Singapore was in line with expectations. SingTel maintained its FY13 guidance.
We maintain our forecast, our Underperform recommendation and SOP-based target price of S$3.23. Likely derating catalysts are the poor results, regulatory risks in India and competition flaring up again in Australia.
SingTel Singapore’s operational performance was in line with expectations. 3Q revenue rose 1.5% qoq and 1.3% yoy, driven by mobile earnings, which rose 4.1% qoq and 3.2% yoy. Revenue, EBITDA and core net profit were in line with forecasts. Core net profit rose 15% qoq due to lower tax expense on the back of lower deferred tax credit relating to inter-company interest expense.
Revenue was in line but EBITDA was 6% ahead of expectations, largely as a result of higher cost savingsand lower mobile net adds in the period in our view. Its operational performance was not impressive. Mobile performance was weak with poor net adds and higher churn while wholesale continues to be a revenue driver. On-net fixed broadband and telephony subscribers declined for the first time.
Mobile service revenue fell 3.8% yoy, marginally lower than our forecast as it was affected by lower termination rates and reduced roaming revenue. Mobile net adds of 22k were weaker than expected. Postpaid net adds came in at 58k but this was offset by higher churn in prepaid, which lost 36k subscribers.
Except for Bharti, SingTel’s associates turned in results that were above our forecasts. Bharti’s core net profit contribution fell 60% qoq and 75% yoy on the back of higher D&A and tax.