Author: kktan
STEng – DBSV
Stays on course to good finish
• 3Q net profit of S$130m (+8% y-o-y) in line; Group on track to meet our FY10 estimates
• Aerospace division contract win momentum remains steady, faster growth expected in FY11
• Revise TP to S$3.85 as we roll over valuations to FY11; maintain BUY for 15% return potential
On track to 6% EPS growth in FY10. 3Q10 net profit of S$130.2m (+8% y-o-y, +5% q-o-q), met 51% of our 2H-FY10 net profit estimate. Revenue came in at S$1.49b, up 10% y-o-y largely owing to higher deliveries of Terrex and Warthog armoured vehicles to the Singapore and UK armed forces, respectively. Despite the unfavourable product mix in Land Systems segment, Group PBT margin in 3Q improved to 10.7% from 10.4% in 2Q, as a result of higher margins in Aerospace and Marine divisions, partly driven by lower staff costs.
Aerospace should fire in FY11. Recovery in the airframe and engine MRO sector has been slow, as evidenced by the lack of sequential growth in Aerospace revenues, but we remain optimistic of a faster pace of growth in FY11. PTF conversions continue to provide stable base loads to STE’s hangars and chances are high that the eventual conversion pipeline for Fedex could be higher than 87 planes in the original contract. MRO order win momentum continues to be healthy as the Group has won S$370m worth of heavy maintenance contracts in 3Q10, in addition to an S$85m component and engine support contract with T’Way Air.
Maintain BUY, potential yield of ~4%. The group ended the quarter with an orderbook of S$10.8b (excluding about S$400m procurement contract) and we remain confident of our FY10-11 forecasts. Our TP is revised up to S$3.85 as we roll over valuations to FY11. A weaker USD can be a slight dampener, going forward.
STEng – BT
ST Engg Q3 profit rises 8% to $130.2m
Turnover up 10% to $1.49b; all core divisions post improved results
SINGAPORE Technologies Engineering yesterday said its third-quarter net profit rose 8 per cent to $130.2 million from a year ago.
Higher sales from all four arms – aerospace, electronics, land systems and marine – lifted the group’s turnover by 10 per cent to $1.49 billion for the three months ended Sept 30.
Net profit for the quarter would in fact have risen by a larger 18 per cent if the Jobs Credit Scheme’s boost to Q3’s earnings last year was stripped out, Seah Moon Ming, group deputy CEO and president, defence business, said yesterday.
Earnings per share rose 30 cents from a year ago to $4.31.
In Q3, commercial sales made up 58 per cent of turnover for the group, which also supplies equipment to the Republic of Singapore Armed Forces (RSAF) and other military customers.
Its order book, which includes only a fifth of the RSAF Advanced Jet Trainers contract announced in September, stands at $10.8 billion. $1.2 billion of these orders are to be delivered in the current quarter.
The group’s cash and cash equivalents and short-term investments came to $1.63 billion as at end September, and its advance payments from customers was $1.4 billion.
All core divisions posted improved performance, but land systems and electronics contributed more to the group’s higher turnover in Q3.
For land systems, turnover jumped 30 per cent to $368 million thanks mainly to higher project deliveries in its automotive business, while the electronics sector’s sales grew 10 per cent to $338 million with more telematics systems sales and the completion of communication, software system and simulator projects.
More modest sales growth of 3 per cent to $486 million was reported by the aerospace sector which enjoyed higher engine sales, while the marine sector’s top line rose 4 per cent to $254 million on more commercial ship repair activity as well as higher engines repair activity and naval logistics management sales.
Net profit thus rose across all four business segments as well.
The group’s overall pre-tax profit margin held steady at 11 per cent for Q3, but aerospace and electronics slipped a point to 14 and 9 per cent respectively, while land systems margin fell two points to 8 per cent due to unfavourable product mix.
ST Engineering now expects, ‘barring unforeseen circumstances’, to achieve higher turnover and profit before tax for FY 2010 compared to FY 2009, group president and CEO Tan Pheng Hock said in a statement yesterday.
Its performance in the third quarter reflects the ‘gradually improving operating environment’, he added.
Before yesterday’s results announcement, ST Engineering’s shares closed seven cents up at $3.47.
STEng – BT
ST Engg Q3 profit rises 8% to $130.2m
Turnover up 10% to $1.49b; all core divisions post improved results
SINGAPORE Technologies Engineering yesterday said its third-quarter net profit rose 8 per cent to $130.2 million from a year ago.
Higher sales from all four arms – aerospace, electronics, land systems and marine – lifted the group’s turnover by 10 per cent to $1.49 billion for the three months ended Sept 30.
Net profit for the quarter would in fact have risen by a larger 18 per cent if the Jobs Credit Scheme’s boost to Q3’s earnings last year was stripped out, Seah Moon Ming, group deputy CEO and president, defence business, said yesterday.
Earnings per share rose 30 cents from a year ago to $4.31.
In Q3, commercial sales made up 58 per cent of turnover for the group, which also supplies equipment to the Republic of Singapore Armed Forces (RSAF) and other military customers.
Its order book, which includes only a fifth of the RSAF Advanced Jet Trainers contract announced in September, stands at $10.8 billion. $1.2 billion of these orders are to be delivered in the current quarter.
The group’s cash and cash equivalents and short-term investments came to $1.63 billion as at end September, and its advance payments from customers was $1.4 billion.
All core divisions posted improved performance, but land systems and electronics contributed more to the group’s higher turnover in Q3.
For land systems, turnover jumped 30 per cent to $368 million thanks mainly to higher project deliveries in its automotive business, while the electronics sector’s sales grew 10 per cent to $338 million with more telematics systems sales and the completion of communication, software system and simulator projects.
More modest sales growth of 3 per cent to $486 million was reported by the aerospace sector which enjoyed higher engine sales, while the marine sector’s top line rose 4 per cent to $254 million on more commercial ship repair activity as well as higher engines repair activity and naval logistics management sales.
Net profit thus rose across all four business segments as well.
The group’s overall pre-tax profit margin held steady at 11 per cent for Q3, but aerospace and electronics slipped a point to 14 and 9 per cent respectively, while land systems margin fell two points to 8 per cent due to unfavourable product mix.
ST Engineering now expects, ‘barring unforeseen circumstances’, to achieve higher turnover and profit before tax for FY 2010 compared to FY 2009, group president and CEO Tan Pheng Hock said in a statement yesterday.
Its performance in the third quarter reflects the ‘gradually improving operating environment’, he added.
Before yesterday’s results announcement, ST Engineering’s shares closed seven cents up at $3.47.
StarHub – BT
StarHub Q3 net profit dips to $82m
Higher phone subsidies continue to erode telco’s bottom line
HIGHER phone subsidies continue to dent StarHub’s bottom line but the company managed to narrow the margin of decline for the third quarter following a sharp reduction in pay-television content cost.
The operator’s net profit for the three months ended Sept 30 stood at $82 million, down 3.7 per cent from $85.2 million a year ago.
For the first and second quarters of 2010, StarHub’s net profit had tumbled 48 per cent and 25 per cent respectively due to a combination of heavy phone subsidies for handsets such as the Apple iPhone, as well as the premium it paid for the World Cup broadcast in June.
Q3 earnings per share came to 4.78 cents, down from 4.97 cents a year ago.
Operating revenue for the period under review rose 2.8 per cent to $552.3 million, from $537.1 million. But operating expenses rose 4.6 per cent to $445.3 million, largely due to higher staff costs.
Q3 sales rose across half of StarHub’s four business segments.
Its mobile arm, which accounted for 54 per cent of total revenue, notched a sales rise of 7.7 per cent to $298.3 million.
However, the increase was overshadowed by a 17 per cent increase in the cost of equipment sold to $61.4 million as smart phones continue to gain favour among Singaporeans.
These handsets, which typically come with higher operator subsidies, now account for more than half of the devices on its network, according to StarHub CEO Neil Montefiore.
The company added 21,500 mobile customers in the quarter to take its tally to 2.1 million.
StarHub’s fixed network revenue rose 6.7 per cent to $85.1 million, while broadband revenue fell marginally by 0.8 per cent to $58.3 million for Q3.
The company attracted 4,000 new broadband subscribers in the period to take its customer base to 412,000.
However, the average revenue per user for this segment fell $3 year-on- year to $47 as more users opted for lower-end Internet plans and subscription discounts for taking up multiple StarHub services.
StarHub had launched new fibre-optic Internet packages in September but the foray is not expected to make a major revenue contribution this year as the new government-backed network is still being progressively rolled out, Mr Montefiore said.
‘The growth is mainly coming from lower-end (cable broadband) users,’ he said in a conference call yesterday.
StarHub’s pay-television arm turned in the worst scorecard, with Q3 sales sliding 7.9 per cent to $92.4 million.
The company gained 2,000 new pay-TV subscribers in the period under review from last year but its customer base fell by 4,000 users on a sequential basis after the curtain call on its World Cup and Barclays Premier League (BPL) broadcast.
‘The (customer) loss is much lesser than we expected,’ said StarHub chief operating officer Tan Tong Hai.
Last year, the operator had estimated that up to 10 per cent of its cable television customers, or some 50,000 subscribers, could jump ship following the loss of its BPL rights to archrival Singapore Telecommunications.
On a nine-month basis, StarHub’s net income fell 25.5 per cent to $182.7 million, while revenue rose 4.9 per cent to $1.7 billion.
The counter closed six cents higher at $2.80 yesterday before its Q3 earnings were released.
SingTel – CIMB
Expect a mixed 2QFY11 performance
2QFY11 results preview
Likely muted; maintain UNDERPERFORM. We expect SingTel’s 2QFY11 core net profit to be about S$950m, flat qoq and yoy on a mixed bag of factors: 1) contributions from Telkomsel should rebound, bolstered by a strong rupiah; 2) Optus should continue to grow; 3) SingTel Singapore’s margins should decline due to content costs and iPhone 4 subsidies; and 4) weaker numbers from Bharti due to 3G spectrum related interest expense and amortisation, and full-quarter losses from Africa. We estimate an interim DPS of 6.5cts or a 55% payout (6.2cts, 52% in 1HFY10). We maintain our SOP-based target price of S$3.09 with a view to rolling it 1-year forward after the results announcement on 11 Nov. Likely de-rating catalysts are weak numbers from India and Singapore and concerns over rising competition in Australia. M1 and Axiata remain our top Singapore and regional telco picks respectively.
The news
We expect SingTel’s 2QFY11 core net profit to be about S$950m, flat qoq and yoy on a mixed bag of factors:
• Contributions from Telkomsel should rebound, bolstered by a strong rupiah. Telkomsel’s 3Q10 core net profit grew 6% qoq while the rupiah had appreciated 2% against the S$.
• Optus should continue to grow although its margins may succumb to pressure from iPhone 4 subsidies. The A$ was relatively unchanged qoq. However, these should be largely offset by:
• Weaker margins in SingTel Singapore due to World Cup and Barclays Premier League-related costs, mio-TV installation costs, and iPhone 4 subsidies, and
• Lower contributions from Bharti which is likely to book full-quarter losses from Africa, interest expense and amortisation related to the acquisition of its 3G spectrum and amortisation. Bharti began amortising the spectrum from 1 September. The rupee rose 5% qoq against the S$.
We anticipate an interim DPS of 6.5 cts or a 55% dividend payout vs. 6.2 cts or a 52% payout in 1HFY10, facilitated by a net debt/EBITDA ratio of only 0.23x vs. 0.3-0.4x in FY09-10.
Valuation and recommendation
We reiterate our UNDERPERFORM rating and SOP-based target price of S$3.09. We plan to roll over our target price 1-year forward after the results announcement. Likely de-rating catalysts are weak numbers from India and Singapore and concerns over rising competition in Australia. We believe SingTel does not appeal in terms of growth or dividends with its low EPS growth and moderate dividend yields of 5%. For exposure to the Singapore telecom sector and regional telcos, we prefer M1 and Axiata respectively.