SingTel – OCBC
Upside fairly limited; downgrade to HOLD
- Guides for stable group revenue
- Low single-digit EBITDA growth
- Downgrade to HOLD with S$3.83 FV
FY13 results mostly in line
SingTel saw its 4QFY13 revenue slipping 6% YoY and 3% QoQ to S$4.48b, weighed down by the weaker A$. Full-year revenue fell 3% to S$18.18b, and was 3% shy of our forecast. Reported net profit for 4Q came in at S$868.2m, down 33% YoY but up 5% QoQ; core earnings slipped 2% YoY and rose 15% QoQ to S$1.0b. Core FY13 earnings eased 1.8% to S$3.61b, or about 4% below our forecast. SingTel has declared a final dividend of S$0.10/share, bringing the fullyear payout to S$0.168 (74% of underlying net profit).
Guides for stable group revenue
Going forward, SingTel expects group consolidated revenue to remain stable. For Group Consumer, it expects revenue to show a low single-digit decline, with lower revenue from Australia; but EBITDA to show a low single-digit rise. Group Enterprise revenue is expected to deliver low single-digit growth, with EBITDA to remain stable. For Group Digital Life, revenue could jump by at least 50%, but it will continue to register startup losses. Overall EBITDA for the group should show low single-digit growth, led by productivity and yield management.
Capex spend of S$2.5b; raises payout guidance
SingTel expects to increase capex spending to S$2.5b (from S$2.1b in FY13), mainly for expansion of its LTE coverage and 3G network enhancement. FCF (free cashflow) is likely to come in at around S$2.0b; it also expects ordinary dividends from associates to grow. Finally, it has raised the dividend payout ratio to 60-75% (from 55-70% previously).
Revising FV to S$3.83; downgrade to HOLD
Incorporating the latest guidance, we pare our FY14 forecasts for revenue by 3% and core earnings by 2%. After updating the value of its listed associates, our SOTP fair value rises from S$3.68 to S$3.83. But given the recent sharp run-up, the upside from here looks fairly limited. Hence we downgrade our call from Buy to HOLD.