SingTel – Phillip
Expect FY13 to be within mgmt guidance
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 lower y-y at S$874 million
- Positive on Singapore performance, while AIS and Telkomsel’s contributions remain strong
- Bharti pre-tax contribution lower q-q, Optus EBITDA stable, but Capex requirements still high
- We rate SingTel as Neutral with new TP of S$3.31
What is the news?
SingTel reported 3Q13 underlying profits of S$874 million, decreasing 2.3% y-y. Management maintained their guidance on the EBITDA and Capex for the various segments. In Singapore, revenue increased marginally 1.3%, due to higher Mobile, IPTV, and Equipment revenue, mitigated by lower International and national telephone revenue. In Australia, revenue decreased 8.1%, largely due to lower mobile revenue attributable to the decline in mobile termination rate and introduction of service credits. AIS and Telkomsel post healthy results, while Bharti’s pre-tax contributions continue to decline.
How do we view
3Q13’s earnings were below our expectations on weaker revenue from Optus, and lower contributions from associates. Positives from this round of results include an increase in data monetizing, indications of lower IPTV content cost in Singapore, effective cost management in Australia, and potentially better performances for Globe and Bharti moving forward. Optus would however require continued higher capex, and may incur high spectrum costs.
We factor in 3Q13’s earnings, and improved q-q valuation of the associates. We derive a new Sum-of-the-parts (SOTP) target price of S$3.31, and maintain our “Neutral” call.