Author: tfwee
SingTel – Phillip
Better-than-expected Results
2Q Results. SingTel reported 2Q operating revenue of S$3,695m (+10.9% yoy) and net profit of S$988m (+3.3% yoy). Moreover, EBITDA increased to S$1,742m (+2.3% yoy). The better-than-expected results were mainly attributed to the strong performances by SingTel and the regional associates.
In view of the excellent performance, SingTel announced an interim ordinary dividend of S$891m or 5.60 cents per share (+51.8% yoy).
Strong Performances. In Singapore, SingTel continued to post double-digit revenue growth due to success in its growth segments such as mobile communications, data and internet as well as IT and engineering. Moreover, in Australia, Optus achieved a slight increase in operating revenue of 3.7 percent to A$1.93 billion despite a highly competitive market.
The regional mobile associates also posted better-than-expected results for the quarter. Pre-tax earnings gained 21 percent to S$600m while post-tax earnings increased 21 percent to S$477m. These results were due to the better performances from Bharti Telecom Group.
FY 2008 Outlook. Management remains optimistic about its business in 2007. In Singapore, operating revenue is expected to grow at single-digit level and capital expenditure to revenue ratio is expected to be in low double-digits. The revenue growth for Optus is likely to be to 2.5 to 3 percent and capital expenditure is approximately A$1.1 billion.
Meanwhile, the pre-tax profit contribution from the regional mobile associates is expected to grow at double digits levels and cash dividends from associates are likely to increase.
Maintain BUY recommendation, target price raised from S$3.90 to S$4.22. SingTel is definitely a BUY for investors. This is because it pays good dividends. Moreover, its business continues to grow in Singapore and Australia with strong contributions from its regional mobile associates. The stock has performed well after the market correction in August 2007.
STEng – CIMB
Quality stock
• Net earnings below expectations but operationally in line. 3Q07 net earnings of S$125m (+9% yoy) were 17% below our expectation and 11% below consensus due to lower investment gains and interest income. 9M07 earnings account for 67% of our full-year estimate. Operating profits, however, were exactly within expectations. EBITDA and EBIT grew 13% yoy to S$180m and S$144m respectively. Sales rose 7% to S$1.2bn, led by a stronger Marine division.
• Aerospace margins shaped up; expect stronger 4Q07. 3Q07 pretax margin rose to 19% from 17% in 3Q06 thanks to a better product mix including redeliveries of two PTF aircraft to Boeing and UPS. The margin improvement was also helped by a turnaround at SAS Components. 3Q07 revenue was flat at S$443m due to the timing of deliveries but 4Q07 could be boosted by more deliveries.
• No growth for first the time in Land Systems. 3Q07 PBT of S$14.5m (down 20% yoy) was a contrast to the strong growth achieved in the previous three quarters. The weaker performance was due to higher R&D spending, lower sales and the product mix. Softness in the US housing market also affected the specialty vehicle business. Management believes the slowdown in the US could continue in 4Q07.
• Outlook remains positive, dividend yield sustained. Management has guided for higher PBT for Aerospace, Electronics and Land Systems in FY07 while Marine earnings are expected to be comparable to FY06. We believe the record-high order book of S$9.91bn and consistent earnings growth (3-year CAGR of 14%) will sustain its dividend yield of 5%.
• Maintain Outperform, target price raised from S$S4.10 to S$4.36, still based on blended valuations. Our earnings estimates remain intact on expectations of a stronger 4Q07. We have rolled forward our P/E valuation to CY09, which raises our target price to S$4.36. The stock’s defensive qualities stand out in the current market with a prospective dividend yield of 5% and ROE of 33% vs. peers’ (SCI and Keppel) averages of 3% yield and 23% ROE. Key risks include a weakening US$ and a slowdown in the US which could hurt its US operations.
SingTel – BT
Foreign currency gains help lift SingTel Q2 profit 3.3%
Regional associates continue to deliver double-digit earnings growth
SINGAPORE Telecommunications (SingTel) yesterday reported a 3.3 per cent rise in second-quarter net profit to $988 million, helped by foreign currency gains.
SingTel also declared an interim dividend of 5.6 cents, up 52 per cent from 3.69 cents a year earlier. The total dividend payout of $891 million represents 50 per cent of the group’s underlying net profit.
Underlying earnings per share for Q2 ended Sept 30 rose 17 per cent to 5.74 cents.
SingTel’s regional associates – especially Bharti and Telkomsel, the largest telcos in India and Indonesia – continued to deliver double-digit earnings growth, up 24 per cent to a pre-tax profit of $633 million.
For the first half, SingTel’s net profit was $1.9 billion, up 6.6 per cent on a 10.7 per cent gain in operating revenue to $7.3 billion.
The telco, which gets 74 per cent of its earnings from outside Singapore, benefited from the stronger Australian dollar and Indian rupee.
SingTel chief financial officer Francis Heng said the Australian dollar and Indian rupee strengthened 8 and 9 per cent respectively against the Sing dollar from a year earlier.
But there was some negative impact from the 6 per cent depreciation of the Indonesian rupiah, he said.
SingTel chief executive Chua Sock Koong said: ‘The group has a policy of hedging all its foreign currency commitments and does not take part in any trading activity . . . that should allay any concern the public may have on that front.’
For Q2, the stronger Australian dollar lifted operating revenue and net profit by $176 million and $11 million respectively.
At home, SingTel’s focus on gaining market share, especially in the mobile segment, helped it achieve double-digit revenue growth, but at the expense of margins.
Revenue rose 10 per cent to $1.2 billion but operating expenses increased a faster 17 per cent to $717 million.
Operational Ebitda (earnings before interest, tax, depreciation and amortisation) margin fell 4.1 percentage points to 42.2 per cent.
The lower margin reflected a change in revenue mix as the lower-margin IT business grew faster than the telecom business, SingTel said.
In addition, it incurred higher acquisition costs and spent more on various initiatives, though these are expected to contribute to revenue and earnings in subsequent years, it said.
SingTel launched mio TV in Q2 and has now signed up 10,000 customers.
Revenue from mobile phones rose 13 per cent to $322 million as the telco added a record 185,000 customers and grew market share 1.3 percentage points to 40.3 per cent.
Australian unit Optus recorded 3.7 per cent revenue growth to A$1.9 billion. Growth in Sing-dollar terms was 12 per cent to S$2.5 billion, as the Aussie dollar strengthened 8 per cent from a year earlier.
But SingTel’s efforts to maintain its position in the competitive market saw its margins fall, with operational Ebitda margin down 1.3 percentage points to 24.7 per cent. Net profit was 5.6 per cent lower at A$123 million.
Overall, SingTel’s pre-tax profit from associates was up 24 per cent to $633 million, driven mainly by Bharti which contributed $197 million.
On SingTel’s overseas acquisition strategy, Ms Chua declined to comment on a reported bid last month for a majority stake in state-owned Ghana Telecom, the West African country’s dominant operator.
‘Clearly we continue to look for investment opportunities, the focus remains in Asia where we think it’s a region we understand best,’ she said.
‘At the same time we are in the process where we are trying to learn new markets whether its in Central Asia or some of the Middle Eastern markets, and we’ve been shown various opportunities in Africa as well, but those markets are still in the stage where we’re learning them.’
MIIF – BT
Macquarie Fund buys China expressway stake
MACQUARIE International Infrastructure Fund Ltd bought an 81 per cent stake in the Hua Nan Expressway in China for about four billion yuan (S$773.8 million), its first toll road investment in the world’s fastest-growing major economy.
The fund, managed by Sydney-based Macquarie Group Ltd, will finance the purchase from the sale of stakes in Brussels Airport and oil operator TanQuid, along with existing debt facilities, it told the Singapore stock exchange yesterday.
Managing director Gavin Kerr is selling non-Asian assets so he can focus on acquisitions in countries such as China, where vehicle sales rose almost 25 per cent in the first nine months of this year. The 31-kilometre Hua Nan Expressway runs through the centre of Guangzhou, the capital of Guangdong province and China’s third-most populous metropolitan area, the fund said.
‘Toll roads are cash generators and with low operating risk,’ said James Chua, who helps manage US$400 million of assets for Philip Capital Management in Singapore. ‘They are a good proxy for anybody who wants exposure to China’s infrastructure.’
The acquisition allows the fund to profit from Hua Nan Expressway’s tolling rights until 2026, and 13 per cent annual growth in traffic on the road since 2004, it said. — Bloomberg
STEng – BT
ST Engg Q3 earnings rise 9.1%
Results boosted by earnings in the group’s marine and aerospace divisions
SINGAPORE Technologies Engineering (ST Engg) yesterday reported a 9.1 per cent year-on-year rise in third-quarter net profit to $125.5 million, thanks to improved earnings in its marine and aerospace divisions.
Revenues for the group rose 6.6 per cent year on year to $1.24 billion for the quarter.
While this is the first time this year that the group’s quarterly earnings growth has dipped into single digit, chief executive Tan Pheng Hock said the results were despite a fall in investment and interest income of nearly $20 million, due to a weaker interest rate and gains from divestments last year.
Core businesses are doing well, with Ebit (earnings before interest and tax) growing by a fifth during the quarter and return on equity improving to 8.4 per cent, Mr Tan said.
But the housing market slowdown in the United States has had ‘some impact’ on ST Engg’s specialty vehicles business there, he said.
Though the unit saved about half a million dollars from synergistic benefits through acquisitions, the slowdown has eroded these savings, he said.
The strategy is now ‘to go into military vehicles, which we have never entered before and are new to, and to export to markets like Latin America’, said Mr Tan.
Research and development (R&D) expenses also led to higher costs at the Land Systems division, which saw revenue dip slightly to $267 million and profit before tax (PBT) fall by a fifth to $14.5 million, he said.
Notwithstanding the above, the division’s results will improve going forward, Mr Tan said.
ST Aero, the group’s aerospace division, saw revenue remain flat year on year at $443 million, though PBT grew 10 per cent to $83.9 million.
This was thanks to better sales mix in the Aircraft Maintenance and Modification business, but offset by reduced investment income from the Engineering and Materials Services unit.
ST Marine saw revenue rise by 38 per cent to $256 million, thanks to significantly higher turnover from shipbuilding in the US, and from ship conversions.
The segment’s PBT increased by 7 per cent to $19.7 million, offset by higher administrative expenses.
The electronics sector saw a 5 per cent growth in revenue to $237 million, though PBT stayed flat at nearly $30 million.
The group’s earnings per share rose 8 per cent year on year to 4.24 cents for the third quarter. Its share price closed at $3.78 yesterday.
Mr Tan also said the group had won a landmark project in Saudi Arabia for an integrated traffic management and security system, which would prime it for further contracts in the Gulf region.
ST Engg’s order book now stands at $9.91 billion, with $1.09 billion to be delivered by the end of the year.