Author: tfwee
SingTel – DBS
Strong Bharti earnings neutralized by exchange rate
Story: Bharti delivered strong earnings growth of 34% y-oy compared to our expectations of 30% growth. However, Indian rupee has weakened about 15% Y-o-Y with respect to Singapore dollar compared to our estimate of 10%. As such in Singapore dollar terms, Bharti’s earnings are inline with our forecasts.
Point: The main surprise in Bharti’s results came from stronger than expected top line growth of 44% Y-o-Y compared to our expectations of 32% growth. This was due to (a) strong subscriber addition of 2.5m per month compared to our estimate of 2.2m subscribers per month
and (b) Lower than expected ARPU decline of 2% Q-o-Q compared to our estimate of 3% decline.
Relevance: Local currencies of Thailand, Indonesia, and Philippines have declined about 14%, 10% and 4% Y-o-Y with respect to Singapore dollar till date. Since regional associates account for more than half of the total group earnings, we believe that SingTel’s earnings growth would
be limited to mid-single digit in the upcoming set of 1QFY09 results on 12th Aug 08. We maintain HOLD for SingTel with our SOTP based target price of S$3.75.
M1 – DBS
Another tough quarter ahead
Comments
Net- profit of S$41.1m was up 1.2% y-o-y mainly due to one time write back of S$6m provisions for leased circuit costs otherwise earnings would have declined y-o-y. Revenue at S$205.3m was up 3.8% mainly due to strong 22% growth in revenue from international call services. EBITDA margin at 43.6% were lower than 45.5% last year but inline with our expectations. The company declared 6.2 cents in dividends as expected.
Slight loss of market share while ARPU held up pretty well. Although M1 added 43K and 14K subscribers across pre-paid and post-paid segments respectively, market share was lower at 23.9% (24.7% in 1Q08) and 28.0% (Vs 28.1%) respectively. Post-paid ARPU was fairly stable while pre-paid ARPU was down at S$16.5 (S$17.5 in 1Q08) due to stiff price competition.
Recommendation
We think MNP pain would be felt for one more quarter. M1 would have reported declining earnings for 2Q08 Y-o-Y if not for S$6m write back. While MNP kick started on 13 June 08, M1’s monthly churn rate has gone up to 1.5% from 1.3% in 1Q08. Subscriber acquisition and retention costs have also gone up subsequently. We expect the full impact of MNP to be visible in 3Q08 numbers. We maintain HOLD with DCF based target price of S$2.20. Regular dividend yield of over 7.3% can be further complemented by special dividends or capital reduction as M1’s net debt-to-EBITDA at 0.6x remains far below its target of 1.5x
M1 – BT
SINGAPORE – MobileOne (M1) said on Thursday that its net profit for Q208 increased 1.2 per cent to $41.1 million (US$30.2 million) as Singapore’s third ranked telco struggled with higher customer costs in a competitive market.
But M1 did not disappoint shareholders and announced a higher interim dividend of 6.2 cents from 2.5 cents a year ago.
Earnings per share was 4.6 cents, up 7 per cent.
For the six months ended June 30 2008, net profit decreased 12.4 per cent to $79.1 million, as the previous corresponding period gained from a tax adjustment.
The company’s operations in Q208 remained stable, consistent with the prospect statement made, it said.
On prospects for the rest of the year, M1 said full mobile number portability was introduced on June 13, 2008 and during the quarter, the mobile market saw an increase in competitive activities, and as expected, M1 saw increases in both its acquisition and retention costs.
This level of competitive activities is likely to settle down in a quarter or two, it said. — SIOW LI SEN, BT NEWSROOM
SPH – DBS
June AdEx Numbers In Line
Story: Nielsen Media’s latest AdEx figures show that SPH’s newspaper display and classified ad volumes for June 2008 grew by 6% y-o-y. For SPH’s 10 months to date for FY08 (September to June), Nielsen Media’s estimates indicate that SPH’s display and classified volumes have risen by 6.4% yoy.
Point: SPH is more or less on track to meet our assumption of 7% yoy growth in display and classified ad volumes for FY08, reflecting robust domestic consumption spending in Singapore thus far. Whilst growth in advertising revenue is expected to slow down, we remain positive on the Group’s longer-term prospects given its monopolistic position in print advertising, attractive property asset i.e. The Paragon and strong balance sheet. All these translate to firm, growing cash flows for SPH, which should help to continue to support the stock’s generous dividend
payouts.
Relevance: We continue to like SPH for its attractive valuation and as a defensive stock, backed by a net yield of >7.5% (premised on 90% payout of EBIT; in line with last 6 years), and re-iterate our BUY call. Our sum-of-theparts valuation for SPH is S$5.75. Stripping out the current value of its net cash holdings and property, SPH core publishing business is trading at undemanding 11.2x earnings or 7.6x EBITDA.
STEng – BT
ST Marine bags S$127.7m deal to build diving support vessel
SINGAPORE Technologies Marine (ST Marine) has secured a S$127.7 million contract to build and outfit a diving support vessel (DSV) for a foreign customer registered in Singapore.
The marine arm of Singapore Technologies Engineering (ST Engg) will build the 107.1m long, 4,000 dwt DSV, which will have a light ‘Ice Class’ notation, in accordance with rules set by Norwegian ship classifier Det Norske Veritas.
The vessel will be equipped with an electric propulsion system with dynamic positioning capability, and have an accommodation space for 100 persons. It will carry a 140-tonne subsea crane, an 18-men diving saturation system and carry two remotely operated vehicles to support diving operations in the subsea sector.
Construction is slated to begin in January next year and delivery is planned for mid-2010. When completed, the DSV will add to the customer’s fleet to serve its clients in the oil and gas industry.
‘This contract signifies an important milestone for ST Marine’s foray into the offshore deepwater oil and gas exploration and subsea sector,’ said ST Marine president Chang Cheow Teck.
The deal is not expected to have any material impact on the consolidated net tangible assets per share and earnings per share of ST Engg for the current financial year.
Contracts won by ST Marine this year included a US$19.4 million deal to build an anchor handling tug and supply (AHTS) vessel, which has deepwater offshore capabilities as well, for Ezra unit Lewek Shipping. In February, it clinched a S$28 million contract from Norway-based Wavefield-Inseis, which provides marine geophysical services using highly specific vessels and the latest seismic equipment, signalling again ST Marine’s capability as a turnkey provider of speciality vessels.