Month: December 2010
SingTel – DBSV
Apple, Airlines and AirTel
• SingTel keen to reduce its reliance on Apple and plans to use “airlines model” to service customers. Target to double non-carriage business in Singapore over the next 3 years.
• Bharti AirTel confirmed end of price wars in India and expects an improved Zain next year. Telkomsel highlighted price inelasticity in Indonesia, effectively ruling out price wars.
• BUY for ~6% yield & earnings recovery in FY12F. Trading at 12.1x FY12F, below historical average of 13.4x.
SingTel partnering with smartphone vendors. SingTel is developing several apps, customized for Singapore. Three of the most popular apps are AMPed, BPL and “I love deals”. Currently AMPed and “Traffic Live” apps are pre-loaded on smart phones from vendors like Samsung, Ericsson and are only available to SingTel subscribers. SingTel also plans to work with vendors like Dell and ZTE in the future for more customized phones. If successful, this may differentiate SingTel offerings while lowering subsidy burden. SingTel revealed its plan to service premium mobile customers, by adapting “airlines model” of offering first-class and business-class kind of service levels.
Inflection point for non-carriage business in Singapore. Management aims to grow its non-carriage (IT & pay TV) business contribution from 25% to 45-50% within 3 years. IT business should benefit from increasing focus on cloud computing where SingTel is far ahead of its peers, while pay TV business should benefit from continued subscriber addition of at least 20K subscribers each quarter.
Bharti led FY11F decline, should lead FY12F recovery too. Bharti confirmed stable competition in India with hopes of an improvement from Zain next year. Bharti could surpass our forecast of 10% earnings growth in FY12F (March YE), if Zain transformation remains on track. SingTel is trading at ~6% yield for FY12F, which we deem too attractive for a blue-chip company.
SingTel – DBSV
Apple, Airlines and AirTel
• SingTel keen to reduce its reliance on Apple and plans to use “airlines model” to service customers. Target to double non-carriage business in Singapore over the next 3 years.
• Bharti AirTel confirmed end of price wars in India and expects an improved Zain next year. Telkomsel highlighted price inelasticity in Indonesia, effectively ruling out price wars.
• BUY for ~6% yield & earnings recovery in FY12F. Trading at 12.1x FY12F, below historical average of 13.4x.
SingTel partnering with smartphone vendors. SingTel is developing several apps, customized for Singapore. Three of the most popular apps are AMPed, BPL and “I love deals”. Currently AMPed and “Traffic Live” apps are pre-loaded on smart phones from vendors like Samsung, Ericsson and are only available to SingTel subscribers. SingTel also plans to work with vendors like Dell and ZTE in the future for more customized phones. If successful, this may differentiate SingTel offerings while lowering subsidy burden. SingTel revealed its plan to service premium mobile customers, by adapting “airlines model” of offering first-class and business-class kind of service levels.
Inflection point for non-carriage business in Singapore. Management aims to grow its non-carriage (IT & pay TV) business contribution from 25% to 45-50% within 3 years. IT business should benefit from increasing focus on cloud computing where SingTel is far ahead of its peers, while pay TV business should benefit from continued subscriber addition of at least 20K subscribers each quarter.
Bharti led FY11F decline, should lead FY12F recovery too. Bharti confirmed stable competition in India with hopes of an improvement from Zain next year. Bharti could surpass our forecast of 10% earnings growth in FY12F (March YE), if Zain transformation remains on track. SingTel is trading at ~6% yield for FY12F, which we deem too attractive for a blue-chip company.
SATS – BT
SATS shows great timing
SINGAPORE Airport Terminal Services’ (SATS) efforts to beef up its portfolio through the acquisition of a major stake in Japan-based airline caterer TFK Corporation seem to have been timed quite nicely.
After confirming it was in talks last week, the ground-handler announced on Monday that it is purchasing – via its wholly owned subsidiary SATS Investments – a 50.7 per cent stake in TFK from Japan Airlines International Co (JALI) for 7.8 billion yen (S$122.3 million).
TFK, which has operations at Japan’s Narita and Haneda Airports, serves about 30 international airlines. TFK’s other shareholders include its founder, the Nomaguchi family, with 43.2 per cent, and Air France with 0.3 per cent.
The acquisition, for starters, gives SATS a foothold in the Japanese catering market at a time when Japan’s aviation industry is expected to receive a boost from the recent opening of a new international terminal at Haneda Airport, which will enable more international airlines to touch down in Tokyo. Japan’s Ministry of Land Infrastructure, Transportation and Tourism had released projections earlier this year, declaring its intent to increase yearly slots at Narita and Haneda Airports by 80,000 and 87,000 respectively to 300,000 and 447,000 slots by 2014 – which suggests further potential for SATS to grow its business by leveraging on TFK.
Synergies
One research house pointed out, however, that SATS could have been a little more circumspect with its acquisition price. While it is unclear at this point exactly how the acquisition will boost SATS’ earnings, the net asset value for JALI’s shareholding in TFK was $90 million for the financial year ended March 31, 2010.
SATS is looking to complete the purchase by this month but also said the acquisition is not expected to have any material impact on the group’s earnings per share or net tangible assets per share for the current financial year ending March 31, 2011.
The acquisition will also mean synergies, especially when it comes to areas such as procurement and training, which should help the company keep a lid on costs.
Aside from its gateway services business, SATS also provides food solutions such as in-flight catering, food distribution and industrial catering.
Liberalising
But perhaps more importantly, the buy comes at a point when Changi Airport is poised to welcome a third ground-handler – another attempt at liberalising the sector after heavy losses forced Swissport International to pull out in March last year.
Four companies have been shortlisted so far, including Jetstar and SIA Engineering Company (SIAEC), and the third ground-handler will join incumbents SATS and Changi International Airport Services in the first quarter of 2011.
While SATS currently nets the bulk of the business at Changi Airport, the entry of a new player could mean stiffer competition down the line, especially if that player turns out to be SIAEC, given that SIAEC is part of the Singapore Airlines (SIA) group.
If nothing else, this latest acquisition will ‘help to diversify SATS’ customer base and reduce its reliance on the SIA Group (which accounts for some 60 per cent of SATS’ aviation revenue)’, CIMB pointed out in a report.
So for SATS, which has been talking about growing its core businesses both in and out of Singapore, it appears that the opportunity to snap up TFK couldn’t have come at a more opportune moment. 
SATS – BT
SATS shows great timing
SINGAPORE Airport Terminal Services’ (SATS) efforts to beef up its portfolio through the acquisition of a major stake in Japan-based airline caterer TFK Corporation seem to have been timed quite nicely.
After confirming it was in talks last week, the ground-handler announced on Monday that it is purchasing – via its wholly owned subsidiary SATS Investments – a 50.7 per cent stake in TFK from Japan Airlines International Co (JALI) for 7.8 billion yen (S$122.3 million).
TFK, which has operations at Japan’s Narita and Haneda Airports, serves about 30 international airlines. TFK’s other shareholders include its founder, the Nomaguchi family, with 43.2 per cent, and Air France with 0.3 per cent.
The acquisition, for starters, gives SATS a foothold in the Japanese catering market at a time when Japan’s aviation industry is expected to receive a boost from the recent opening of a new international terminal at Haneda Airport, which will enable more international airlines to touch down in Tokyo. Japan’s Ministry of Land Infrastructure, Transportation and Tourism had released projections earlier this year, declaring its intent to increase yearly slots at Narita and Haneda Airports by 80,000 and 87,000 respectively to 300,000 and 447,000 slots by 2014 – which suggests further potential for SATS to grow its business by leveraging on TFK.
Synergies
One research house pointed out, however, that SATS could have been a little more circumspect with its acquisition price. While it is unclear at this point exactly how the acquisition will boost SATS’ earnings, the net asset value for JALI’s shareholding in TFK was $90 million for the financial year ended March 31, 2010.
SATS is looking to complete the purchase by this month but also said the acquisition is not expected to have any material impact on the group’s earnings per share or net tangible assets per share for the current financial year ending March 31, 2011.
The acquisition will also mean synergies, especially when it comes to areas such as procurement and training, which should help the company keep a lid on costs.
Aside from its gateway services business, SATS also provides food solutions such as in-flight catering, food distribution and industrial catering.
Liberalising
But perhaps more importantly, the buy comes at a point when Changi Airport is poised to welcome a third ground-handler – another attempt at liberalising the sector after heavy losses forced Swissport International to pull out in March last year.
Four companies have been shortlisted so far, including Jetstar and SIA Engineering Company (SIAEC), and the third ground-handler will join incumbents SATS and Changi International Airport Services in the first quarter of 2011.
While SATS currently nets the bulk of the business at Changi Airport, the entry of a new player could mean stiffer competition down the line, especially if that player turns out to be SIAEC, given that SIAEC is part of the Singapore Airlines (SIA) group.
If nothing else, this latest acquisition will ‘help to diversify SATS’ customer base and reduce its reliance on the SIA Group (which accounts for some 60 per cent of SATS’ aviation revenue)’, CIMB pointed out in a report.
So for SATS, which has been talking about growing its core businesses both in and out of Singapore, it appears that the opportunity to snap up TFK couldn’t have come at a more opportune moment.
SPH – BT
SPH seeks opportunities in property, new media
Group will continue to focus attention on core print business
SINGAPORE Press Holdings (SPH) is actively seeking out fresh opportunities for its property and new media arms while enhancing its core print business, the group’s chairman and management told shareholders yesterday.
Shareholders raised a couple of queries over whether dividend yields might fall now that the final contributions from SPH’s Sky@eleven condominium project have been recognised.
Chief executive Alan Chan said that while Sky@eleven was indeed a ‘one-off project’, the group’s property division remains on the look-out for opportunities.
He cited its recent bid for a residential-commercial site at Bedok Town Centre, which was the second highest after CapitaLand joint venture’s bid, as an example of active participation in competitive tendering for projects with high potential. Clementi Mall will begin to contribute a stream of rental income once it is operational early next year, he said.
Acknowledging that shareholders had gained in recent years from the recurring profits Sky@eleven brought, Mr Chan said that the challenge would be for the group to now find new businesses to make up for the difference. These would include, among others, its stake in the OpenNet, which is building the optical fibre network for Singapore’s Next Generation Nationwide Broadband Network, as well acquisitions to strengthen its events and exhibition services arm.
SPH chairman Tony Tan also told shareholders, who filled the News Centre’s auditorium yesterday, that the media and property group would ‘continue to focus our attention on our core print business’, improving content and widening readership. At the same time, ‘we will keep growing our adjacent businesses to secure the company’s long-term growth’, he added.
In the light of how the Internet has challenged the traditional media industry worldwide, new media is ‘an investment we cannot neglect’ to prepare SPH for the future, Mr Chan said in response to questions on when the group’s new media ventures would turn profitable.
He added that its ‘first-generation products’, such as the newspapers’ websites, are in fact already profitable, though ‘second-generation’ ones such as STOMP, RazorTV and ST701 are still being nurtured.
All resolutions to re-appoint or re-elect the board’s directors, including Ascendas CEO Chong Siak Ching, who was appointed as a non-executive director in October, were duly passed by shareholders yesterday.