Author: tfwee
SMRT – BT
SMRT’s profit in Q1 increases 6.2% to $40.3m
STRONG train ridership growth and higher rental revenue boosted SMRT Corp’s net profit by 6.2 per cent to $40.3 million for the first quarter ended June 30, 2008 compared with the corresponding period a year ago.
Group revenue in Q1 rose 11.2 per cent to $215.9 million.
Total operating expenses rose 13.1 per cent to $173.3 million due to increased staff and related costs, energy costs and other operating expenses.
But thanks to the higher revenue and other operating income, the group turned in an operating profit of $48.2 million – an 8.0 per cent improvement over the same quarter last year.
‘SMRT has continued to grow its profits on the back of strong ridership growth and increased rental revenue,’ said president and CEO Saw Phaik Hwa. ‘In the next 12 months, we will be faced with a higher inflationary operating cost environment with volatile energy prices. We will continue to manage costs and focus on increasing revenue.’
Earnings per share rose to 2.7 cents from 2.5 cents year-on-year. No dividend was declared for the first quarter.
SMRT operates Singapore’s biggest rail network, along with a smaller fleet of buses and taxis.
Its Q1 MRT revenue grew 8.2 per cent to $115.6 million as average daily ridership rose. The ridership growth, partially offset by higher staff and electricity costs, led to a 9.1 per cent increase in operating profits to $34.9 million. SMRT’s current six-month electricity supply contract ends in September but it has an option to renew it.
Q1 revenue from bus operations was up 5.3 per cent to $50.9 million but they posted an operating loss of $3.3 million due mainly to higher diesel costs.
Diesel subsidies and a rise in other operating expenses led to an operating loss of $1.3 million for the taxi division in Q1, although taxi rental revenue increased by 5.6 per cent to $18.9 million with a higher average hired-out fleet.
SMRT’s commercial activities fared better. Increased space and better rental yield from various MRT stations pushed Q1 rental revenue up 47.2 per cent to $13.8 million as operating profits grew 51.4 per cent to $10.3 million.
Meanwhile, more advertising on trains and buses and in MRT stations during the first quarter boosted advertising revenue by 5.3 per cent to $5.6 million. Operating profits also rose 12.9 per cent to $3.7 million.
Looking forward, SMRT expects the operating environment to remain challenging in the next 12 months, with the cost of electricity and diesel likely to remain high. It said that if this persists, its bus operations will continue to operate at a loss. SMRT has over 800 buses, or less than a third of market leader SBS Transit’s fleet.
M1 – OCBC
Another decent set of results
Mildly upbeat 2Q08 results. MobileOne (M1) posted another decent quarter of results, with 2Q08 operating revenue up 2.8% YoY (+0.7% QoQ) at S$205.3m, while net profit rose 1.5% YoY (+8.3% QoQ) to S$41.1m. EBITDA also rose 2.0% YoY (+5.8% QoQ) to S$83.5m, although margin slipped slightly from 45.5% in 2Q07 to 43.6% in 2Q08, it was still slightly higher than the 42.2% seen in 1Q08. As expected, the YoY dip in EBITDA margin was due to the run-up to true Mobile Number Portability (MNP). On an interim basis, operating revenue rose 3.3% YoY to S$409.2m, meeting nearly 51.0% of our FY08 estimate. Although 1H08 net profit slipped 12.5% YoY to S$79.1m, meeting 46.6% of our FY08 forecast, we note that the fall was mainly due to a tax credit in 1Q07; excluding the S$13.0m tax effect, the net profit growth was 2.3%.
MNP raises acquisition/retention costs. On the operating front, M1 added some 57k of new subscribers, with some 14k of new post-paid subscribers – double the pace seen in 1Q08, while new pre-paid users increased by 43k. Post-paid Average Revenue per User (ARPU) also recovered from S$61.6 in 1Q08 to S$61.9; pre-paid ARPU eased slightly from S$16.8 to S$16.5. M1 also saw its overall market share eased from 27.4% in 1Q08 to 26.0%, mainly due to the fall in pre-paid market share from 24.7% to 23.9%, as it is less keen on fighting for market share in this highlycompetition segment. As mentioned earlier, in the run-up to the introduction of MNP in mid-June, M1 saw a sharp jump in its acquisition cost, which rose 52.4% QoQ in 2Q08 to S$218/subscriber, while retention cost jumped 22.8% QoQ to S$167/subscriber; both were the highest levels over the last two years. However, management believes it is seeing signs that the competition is easing and believes costs would start to normalise in 2H08.
Stable operations guidance in 2H08. Going forward, management is maintaining its guidance of stable operations for the year. M1 has also declared an interim dividend of S$0.062/share, and will maintain a total cash distribution equivalent to at least 80% of its earnings. Nevertheless, due to the higher operating expenses, we will pare our earnings estimates for FY08 by 4.9% and FY09 by 4.0%. But our DCF-based fair value remains unchanged at S$2.33. We continue to like M1 as a defensive stock, given its stable earnings stream and good dividend payout, hence we retain our BUY rating.
SingTel – CIMB
Bharti continues to charge ahead
Bharti’s 1QFY09 results
Within expectations. SingTel’s 30.5% associate Bharti reported a 1QFY09 net profit of Rs20.3bn (+34% yoy, +9.3% qoq), which was within consensus but below our expectations. When annualised, the results were 95% of consensus forecast but only 87% of ours. Nevertheless, this was another strong set of results as revenue leapt 44% yoy on the back of robust subscriber growth of 63% yoy. EBITDA margins were steady at 41.5%.
Sterling revenue growth. As it continued its rural push, Bharti extended its lead in market share to 24.8% (+0.5% pt qoq, +1.1% pts yoy). Consequently, revenue surged 44% yoy. Although ARPU was diluted by its push into rural areas, margins were propped up by economies of scale.
EBITDA margins firm. Bharti was able to sustain its margins despite the onslaught of competition and call-tariff reductions. We attribute the margin firmness to its unrivalled economies of scale. Bharti highlighted that profitability was not under pressure and it has always been focused on profitability per subscriber. With its pre-emptive move to cut rates, we believe that rivals or new entrants would have little room to manoeuvre. That said, margins across the sector could come under pressure, should competition continue to drive down tariffs.
Tying up with MTN and 3G policy. With the MTN-Reliance deal now dead in the water, talk has shifted back to a resumption of negotiations between Bharti and MTN. Should any deal materialise, we would be positive as it would help Bharti evolve into an emerging-market powerhouse. However, the risk remains the price to be paid for MTN. Recent acquisitions have been pricey and have resulted in de-ratings in the share prices of acquirers.
Separately, India’s 3G policy is set to be announced soon. We believe Bharti stands a strong chance of securing the coveted 3G spectrum. This is crucial for distinguishing the company in this competitive market and in alleviating margin pressures given the premium services it would be able to offer.
Forecasts unchanged. The strong set of numbers underscores management’s ability to extract profits even from first-time users in poorer and less developed areas. Bharti’s economies of scale and unrivalled branding power set it apart from competitors and showcase its best-in-class attributes. India’s growth potential remains attractive over the near term, although margin pressures could creep in over the longer term. We maintain our earnings estimates as we see stronger quarters ahead and continue to believe that Bharti remains SingTel’s most reliable growth driver. We expect Bharti to contribute 21% of SingTel’s pre-tax profits in FY09.
Valuation and recommendation
Maintain NEUTRAL and sum-of-the-parts target price of S$4.05. We believe SingTel lacks catalysts given the mixed performance of its portfolio. With mature operations in Singapore and Australian and Telkomsel facing intense competition, Bharti is SingTel’s key earnings driver. Key risk for SingTel is earnings delivery at Telkomsel which is facing increased competition from Excelcomindo.
SFI – BT
SFI’s Q2 profit up 29% on strong UK, local showing
SINGAPORE Food Industries (SFI) has reported a 29 per cent rise in net profit to $5.4 million for its second quarter ended June 30, as its Singapore and UK businesses performed strongly.
Revenue grew 4.7 per cent year on year to $166.3 million, with earnings per share rising to one cent from 0.8 of a cent.
Net profit for the half-year ended June was $18.2 million, up 29.5 per cent as revenue grew 3.4 per cent to $342.7 million.
The group has declared an interim dividend of 1.8 cents per share. It said that the interim dividend, previously declared in Q3, has been brought forward to Q2. SFI shares last closed at 78.5 cents.
CEO Roger Yeo said ‘both the Singapore and UK operations continued to improve their underlying business performance in Q2, with strong profit growth’.
All business segments in Singapore reported strong sales growth in Q2. As a result, H1 sales in Singapore grew 17.5 per cent.
Improved performance in UK/Ireland operations was led by steady sales growth in the Daniels business, up 10.5 per cent in pound sterling terms. Overall UK/Ireland sales, after removing the impact of weaker sterling against the Singapore dollar, increased 4.7 per cent.
But when reported in Sing dollars, overall sales in UK/Ireland decreased 4.9 per cent.
‘Overall, the outlook for FY 2008 continues to be for growth in earnings over FY 2007,’ SFI said.
M1 – BT
M1 posts 1.2% rise in Q2 profit, adds 57,000 customers
Mobile number portability ‘not as bad as it might have been’, says CEO
MOBILEONE (M1) yesterday reported a slim 1.2 per cent increase in second-quarter net profit to $41.1 million, as it struggled with higher customer costs in a competitive market.
M1, Singapore’s third-ranked telco, is the first of the trio to report results since the introduction of full mobile number portability. StarHub reports on Aug 6 and SingTel on Aug 12.
M1 chief executive Neil Montefiore said portability was a ‘peaceful event’ and not as bad as it might have been. ‘There were nowhere near the problems we saw in markets like Hong Kong,’ he said. M1 is ‘looking at a few thousand customers in July who want to take their numbers with them’.
Earlier this month, the Infocomm Development Authority said about 6,500 mobile subscribers have jumped ship since June 13 when full portability took effect. These ‘switchers’ amount to less than 0.1 per cent of the holders of the country’s six million mobile lines.
The three telcos unleashed fierce marketing tactics ahead of June 13 to hang on to customers. In Q2 ended June 30, M1’s advertising and promotion expenses rose 51.3 per cent quarter on quarter to $5.9 million.
Mr Montefiore said the telco has seen a reduction in acquisition and retention costs in the ‘past week or so’.
M1 has announced an interim dividend of 6.2 cents. In the same period last year, it paid 7.10 cents, consisting of an interim dividend of 2.5 cents plus 4.6 cents via a capital reduction. Q2 earnings per share were 4.6 cents, up 7 per cent.
For the six months ended June, net profit was $79.1 million, down 12.4 per cent from a year earlier, when the result was swelled by a tax adjustment. In Q2, the company added 57,000 customers, giving it a base of 1.6 million. But its market share continued to slip, to 26 per cent from 28.4 per cent a year ago.
Mr Montefiore said the telco is not focused on market share but customer and revenue growth. Q2 operating revenue increased 2.8 per cent to $205.3 million.
All Q2 revenue streams registered growth, except for handset sales which fell 29.8 per cent to $13.9 million due to lower selling prices. International call services was the best performer, up 22.2 per cent to $38 million.
Free cash flow almost doubled to $105.6 million for the first half, mainly due to higher tax a year ago.
On prospects for the rest of the year, M1 said it expects competitive activity to settle down in a quarter or two. It also expects operations to remain stable for the year.
M1 shares closed two cents lower yesterday at $1.92.