Month: April 2012
SMRT – Lim and Tan
• The $900 mln to be spent over 8 years to deal with the ageing rail infrastructure ($112.5 mln pa) will likely unnerve investors first. And merely saying it will be co-funded with LTA does not help either.
• What would be helpful would be for the authorities to clarify that LTA will be responsible for the infrastructure replacements, and SMRT for replacing what needs to be replaced of the operating assets.
• Assuming 50-50 split, which is too simplistic, but which works out to $56 mln a year for SMRT.
• Point is SMRT presently spends about $30 mln a year on repairs and maintenance.
• We have earlier downgraded SMRT to a HOLD.
SingTel – BT
Proposal to raise spectrum rates sinks telco stocks
Regulator wants ten-fold rise from the controversial 2008 sale prices
The Indian telecoms regulator's proposal for a near 10-fold increase in basic mobile phone spectrum prices and switching of radio spectrum given to older carriers knocked down shares of leading operators on fears that the big potential payouts will further hurt an already bleeding industry.
Shares in top mobile operator Bharti Airtel fell as much as 7.5 per cent yesterday morning to their lowest level since July 2010, while fourth-ranked Idea Cellular fell as much as 9.8 per cent, before cutting some losses. Second-ranked Reliance Communications fell as much as 3.4 per cent.
The country's telecoms sector, the world's second-biggest by subscribers, has been battered by ferocious competition and a scandal over below-market price sale of lucrative mobile phone permits in a 2008 state sale process.
The Supreme Court has ordered 122 permits granted to eight operators in the 2008 sale be revoked in early June and asked the government to redistribute radio airwaves through an open bidding process.
SMRT – BT
SMRT to spend S$900 mln to renew, upgrade systems
Public transport operator SMRT Corp said on Tuesday it will spend S$900 million (US$720 million) on renewal and preventive maintenance to address problems that have led to numerous train breakdowns in recent months.
Most of the work will be done over the next four years, SMRT said.
"Some of the measures are already on-going and will be accelerated, while others are new," interim chief executive officer Tan Ek Kia said in a statement.
SMRT said it was discussing cost-sharing arrangements with the Land Transport Authority.
SMRT – BT
SMRT to spend S$900 mln to renew, upgrade systems
Public transport operator SMRT Corp said on Tuesday it will spend S$900 million (US$720 million) on renewal and preventive maintenance to address problems that have led to numerous train breakdowns in recent months.
Most of the work will be done over the next four years, SMRT said.
"Some of the measures are already on-going and will be accelerated, while others are new," interim chief executive officer Tan Ek Kia said in a statement.
SMRT said it was discussing cost-sharing arrangements with the Land Transport Authority.
StarHub – Kim Eng
Going for the Gold
Expect earnings to rebound in 1Q12. StarHub will report 1QFY12/12 results on 4 May. We expect net profit of SGD85m, up 8% QoQ from an adjusted SGD79m. Given its rather lazy balance sheet currently, we will be on the lookout for indications of a dividend hike in coming quarters, but even without any, the current yield is still attractive at 6.3%. Given its recent outperformance, the stock may pull back before re-rating further, but fundamentally, we maintain our BUY call with a higher target price of SGD3.50, based on the average 5.7% yield of the top 15 dividend stocks over a billion in market cap.
Margins should rebound. For one thing, we do expect margins to bounce back in 1Q12. Similar to M1, margins should recover QoQ. In 4Q11, handset subsidies pushed EBITDA margin to 30.7% (excluding capex writebacks), although the severity was much less than the other telcos. Relieved of this pressure, we expect margin to rebound toward 32% in 1Q12. Nevertheless, our full year forecast assumes a lower 31% margin, reflecting higher cost pressures in 2H12.
Mobile business should continue to outperform. In addition, mobile should grow QoQ despite lower seasonality, for a couple of reasons. One, we believe StarHub has gained market share at the higher end of the market, with its postpaid base now skewed more toward the higherend SmartSurf plans. Two, we expect data revenue to continue to benefit from higher penetration for smartphones and tablets.
Pay TV should also get a price hike kick. Last Aug, StarHub raised its Pay TV basic rate by SGD2, which stemmed the decline in Pay TV revenue that started after the loss of BPL. 1Q12 should continue to reflect this increase. However, margins may be squeezed slightly by operational costs related to cross-carriage ahead of the UEFA Euro 2012 games that will kick off in Jun 2012.
What to look out for. In particular, we would be interested in whether StarHub will utilise its currently under-utilised balance sheet to raise dividend payout this year. In 2006 and 2007, it had made two rounds of capital returns when net debt/EBITDA fell to current levels. Further, it has raised dividends every year except 2010 and 2011. Looking at its forward cashflow and capex needs, we reckon it is in a good position to increase dividends beyond SGD0.20 a share.