Author: tfwee
SingTel – DBS
Strong results, weak dividends and slow growth ahead
Comment on Results
Excluding IDA compensation of S$84m last year, underlying net profit of S$968m was up 9.2% y-o-y and better than our and consensus expectations of S$905m. The group had an exceptional gain of S$153m from the sale of Bharti’s minority stake in a subsidiary. The company announced a final dividend of 6.9 cents; fell short of our expectations of 15 cents (6.5 cents regular and 8.5 cents in special dividends)
Singapore operations better than expected. Singapore’s operational EBITDA at S$469m was up 0.8% and 5% above our EBITDA estimate of S$448m. While revenue growth was much higher at 11% due to significant market share win in the mobile segment, EBITDA margin declined to 36.4% from 40.3% last year.
Optus inline. Optus’ operational EBITDA at A$538m was up 2.7% and inline with our estimates. Revenue growth was slightly slow at 4.5% while EBITDA margin at 27.8% was inline.
Associates contribution inline. Associate pre-tax contribution at S$646m was up 19% and inline with our estimates. As expected Bharti delivered 41% growth in contribution at S$222m. AIS also delivered 55% growth in contribution at S$76m,mainly due to recognition of S$20m interconnection income. Telkomsel clearly slowing down with 6.4% growth only.
Tax was lower than expected. Tax of S$290m was lower than our estimate of S$311m as we had assumed higher tax rate of 23% compared with tax rate of only 20.9% for 4Q08.
Recommendation
Management guiding for single digit growth in mature markets. Management is guiding for (1) mid-single digit growth in revenue for Singapore with stable EBITDA margins around 40%, capex rising to mid-teens level of revenue because of mobile capacity expansion and upgrade for fixed lines (2) Single digit growth in revenues for Optus and EBITDA expected to grow inline with revenues, capex at midteen levels of revenue (3) Associate earnings to grow at double digit, albeit slower than last two years due to increased competition in Indonesia and higher losses at Warid. (4) Dividend payout ratio 45- 60% up from 40%.
Single digit growth in FY09. We see 3% growth in EBITDA for Singapore and Optus and 14% growth (versus 24% in FY08) in associate contribution for FY09. Overall, we see 8% growth in group’s earnings in FY09 and maintain HOLD at TP of S$3.98.
SingTel – BT
SingTel streaks ahead in prepaid mobile market
WITH aggressive marketing, Singapore Telecommunications has trumped the competition in the prepaid mobile phone market, the only growth segment in Singapore’s mature telco market.
Singapore’s handphone subscriptions stands at 5.9 million, exceeding the 4.59 million population which gives a penetration rate of 129.1 per cent.
Yesterday, SingTel also trumpeted that its latest combined regional base has zipped past 185 million customers, a pretty impressive number for the telco to launch the iPhone later this year. On Monday, SingTel said it had clinched the right the sell the iPhone across four markets in Asia – Singapore, Australia, India and the Philippines.
SingTel, which reports full-year 2008 results today, said in Singapore that it added a record 244,000 mobile customers in the first three months of this year. This brought its total mobile customer base to 2.57 million on March 31, a gain of 41 per cent from a year ago.
The growth was fuelled by demand in the prepaid mobile segment, which is dominated by foreign workers and their families. During the quarter, SingTel netted 207,000 prepaid mobile customers. This pushed its prepaid mobile customer base to 1.2 million customers, making SingTel the clear market leader.
Rivals StarHub and MobileOne grew their customer base a slower 13 per cent and 14.8 per cent respectively. StarHub in the same period has 975,000 prepaid out of a total 1.8 million mobile phone customers. M1, the third ranked telco, has 679,000 prepaid customers out of a total 1.5 million.
All three telcos are locked in an intense fight to hold on to their mobile phone customers ahead of next month’s true mobile number portability launch, where subscribers can change operators effortlessly at zero cost.
In the region, SingTel’s combined mobile customer base reached 185.34 million on March 31. The group’s mobile customer base in the eight markets – Australia, Bangladesh, India, Indonesia, Pakistan, the Philippines, Singapore and Thailand – rose almost 50 per cent from 123.79 million customers a year ago. Compared with the previous quarter, the increase was 8 per cent, or a record 13.8 million customers .
Associate Bharti, India’s largest telco, drew a record 6.82 million new customers for the quarter, bringing its total to 61.99 million customers – up 67 per cent from a year ago.
ComfortDelgro – BT
ComfortDelGro Q1 net profit slips 9.4%
RISING fuel costs put the brakes on ComfortDelGro Corp’s net profit for the first quarter ended March 31, causing it to fall 9.4 per cent to $50.2 million.
The world’s second largest land transport group blamed the past few months’ sharply increasing fuel prices on a $17.5 million rise in its energy and fuel costs. It added that a loss was also incurred in the sale of diesel to the company’s taxi drivers as large discounts were still being extended to them.
But the land transport giant saw Q1 revenue rise 5.8 per cent to $753.5 million, thanks to strong contributions from both its local and overseas operations. The group said growth was broad-based, with most of its businesses chalking up increases in turnover.
ComfortDelGro’s overseas operations accounted for 44.3 per cent of turnover and 47.1 per cent of operating profit.
‘It has been a difficult quarter with oil prices continually reaching new highs,’ said ComfortDelGro MD and group CEO Kua Hong Pak in a statement. ‘But we remain focused on growing our businesses. Indeed, our various operations around the world remain sound, with most showing good growth at the top line.’
First-quarter turnover for the bus business rose 5.7 per cent to $378.6 million on higher contributions from the group’s operations in Australia and China. Overseas bus operations made up 59 per cent of total group bus turnover.
At listed unit SBS Transit, net profit for the first quarter ended March 31 fell 10.2 per cent to $15.3 million on increases in fuel costs, depreciation and premises costs. But revenue rose 8.4 per cent to $176.6 million mainly due to higher bus and rail revenue, and higher rental income.
Earnings per share for SBS’s Q1 was 4.96 cents, down from the previous corresponding quarter’s 5.58 cents. The unit did not declare any dividend for Q1. The final tax-exempt (one-tier) dividend of 3.25 cents per share which SBS earlier declared for the year ended Dec 31, 2007, will be paid on May 28.
ComfortDelGro’s Q1 turnover from the taxi business was up 6 per cent to $233.9 million. In China, taxi’s turnover rose 13.6 per cent to $26.8 million on contributions from its Nanjing operations, which were acquired last August, as well as increases in fleet size in Nanning and Chengdu.
In Singapore, taxi’s turnover was up 12.2 per cent to $147.6 million mainly because of an increase in cashless transactions. But the group’s diesel business posted an operating loss of $6.3 million – in contrast to an operating profit of $6.4 million a year ago – due to diesel discounts for its taxi drivers.
As for the rail business, Q1 turnover rose 14.2 per cent to $25.7 million as the average daily ridership for the North-east MRT Line jumped 14.7 per cent to 292,000, and that on the Punggol and Sengkang LRTs increased 12.9 per cent to 42,000.
ComfortDelGro’s Q1 earnings per share was 2.41 cents, down from last year’s 2.67 cents. Net asset value per ordinary share was 73.35 cents, up from Q1 2007’s 72.44 cents. No dividend has been declared by the group.
Looking ahead, Mr Kua said the global economic outlook remained ‘very uncertain and a more widespread decline in global economic activities cannot be ruled out’.
‘Inflationary cost pressures will be felt more keenly and oil prices are likely to remain volatile and high,’ he said.
ComfortDelGro’s share price ended unchanged at $1.76 yesterday, while SBS Transit closed one cent higher at $2.22.
SingTel – CIMB
Slowing growth in the horizon
• Telkomsel de-rating + Strong S$ = hold. Telkomsel (35% associate) is poised to experience market share loss and margin erosion amidst a fierce price war in Indonesia. We do not expect a recovery in the near-term. In addition, prospects for a stronger S$ against A$ and regional currencies means foreign exchange tailwinds that SingTel enjoyed in 2007 will be missed in 2008. These two reasons drive our downgrade to Neutral.
• 4QFY08 preview. Expecting full year FY08 core earnings of S$3.9 bn (+6% yoy) and final DPS of 6.0 S cts. Our earnings expectation is in line with consensus estimates but believe that SingTel could surprise on the dividend front with a final DPS of 6.0 S cts, bringing full year FY08 DPS to 17.0 S cts (consensus: 13.5 S cts).
• Earnings estimates reduced. We have cut our FY09-10 earnings estimates by 6.8- 7.6%, primarily on our 8-11% earnings downgrade for Telkomsel and adjustments to currency assumptions that reflect a stronger S$ against A$ and regional currencies.
• Downgrading to Neutral, sum-of-parts valuation declines to S$4.05 from S$4.45. The bulk of the valuation adjustment is due to revised assumptions for a stronger S$ and Telkomsel earnings downgrade The lack of upside catalysts for existing businesses and prospects of slower growth in FY09 underpin our Neutral call. SingTel is our top pick for the Singapore telco sector. It offers the best growth prospects, potential M&A related share price catalyst (MTN deal via Bharti) and decent recurring yield of over 4.5%.
SingTel – Phillip
Indonesian court ruling
Outcome. The Indonesian district court upheld the ruling by the Indonesian competition watchdog KPPU that Temasek and its affiliates had breached Indonesia’s anti-monopoly laws. Therefore, Temasek had to divest its stake in PT Telkomsel or PT Indosat. The timeframe had also been reduced from two years to one year. Moreover, Temasek was given the option to halve both stakes within one year. Temasek mentioned that it would appeal the ruling while SingTel would study the ruling before deciding to appeal.
SingTel is likely to keep its stake in PT Telkomsel. We believe that in the worstcase scenario where Temasek loses its appeal, it will sell PT Indosat instead of PT Telkomsel. This is because PT Indosat is the smaller telecommunications player in Indonesia. In other words, SingTel will most probably maintain its stake in PT Telkomsel.
Maintain BUY recommendation, target price at S$4.22. We are maintaining our BUY recommendation and target price as its operations in Indonesia are unlikely to be affected by the final outcome of the ruling after the appeal.