Author: tfwee
SingTel – DBS
Focus on the “Home Ground”
• Singapore and Optus EBITDA improved sequentially in 4Q09 despite weak macro
environment.
• We expect Singapore to continue to grow its data and mobile business, while Optus might benefit from an improved competitive environment in Australia.
• Our revised FY10F-FY11F earnings are 4%-6% above consensus. Maintain BUY with target price of S$3.05.
Managed service, IT projects and mobile business to drive Singapore growth. SingTel launched various packages focusing on cost savings for SMEs in the last quarter, which should help to drive growth from the managed service business. In the conference call, management also hinted that it expects large IT government projects in the current year. In the mobile segment, SingTel has significantly increased its market share in the last couple of quarters. Going forwards, even if ARPU declines from lower usage, SingTel’s bottom-line stands to benefit from recently acquired subscribers, whose acquisition costs have been expensed off in the recent quarters already.
Margins may rebound back in Australia. Optus witnessed healthy margins across its various segments in 4Q09. We believe that subsequent to the Hutch-Vodafone merger, Optus margins can start to trend north as Hutch-Vodafone focuses on enhancing its low margins. Management’s guidance of low single digit growth in revenue and EBITDA, despite official forecast of 1% yoy contraction in Aussie economy in 2009, also points in the same direction. We expect 25% EBITDA margins in FY10F versus 24.8% margins in FY09A.
Further rebound in regional currencies is the key catalyst. In the past one-month Indonesian rupiah and Aussie dollar have strengthened 7-10% versus SGD. Indian rupee is still weak but any rebound could be earnings accretive for SingTel. We maintain BUY with SOTP based target price of S$3.05.
ComfortDelgro – BT
ComfortDelGro Q1 net up 4.6%
Bus business revenue slips 8.6% on foreign currency translation effect
COMFORTDELGRO’S net profit for the first quarter ended March 31, 2009, rose 4.6 per cent to $52.5 million, due largely to lower operating expenses incurred.
But Q1 revenue slipped 4.4 per cent to $716.6 million due to the negative translation effect of the weaker British pound and Australian dollar. The land transport giant said that although revenue growth was broadbased, both in geographical and segmental terms, this was offset by the adverse foreign currency translation effect.
It added that if not for this effect, revenue would have risen by 2.3 per cent to $766.7 million.
First-quarter operating profit increased by 7.0 per cent to $81.5 million as operating expenses decreased. The latter had dropped 5.7 per cent to $635.1 million mainly because of the lower cost of diesel purchased for resale to the group’s taxi drivers, as well as a reduction in fuel and electricity costs.
Staff costs were also lower, thanks to the government’s Jobs Credit scheme which subsidises wage bill for local workers.
Earnings per share was 2.52 cents per share, up from 2.41 cents in the previous corresponding quarter. No dividend has been recommended.
‘The global economic outlook is still very uncertain and the possibility of a global flu pandemic breaking out remains,’ said ComfortDelGro managing director and group CEO Kua Hong Pak. ‘Given the difficult operating environment, we have performed satisfactorily during the quarter.’
The group’s bus business saw Q1 revenue decline 8.6 per cent to $347.9 million mainly on a $32.3 million drop from the UK bus business because of the adverse forex impact.
In Singapore, revenue dipped 0.4 per cent to $142.2 million as the average daily bus ridership fell marginally by 0.3 per cent to 2.28 million. Including advertising and rental revenue, total bus revenue at listed unit SBS Transit came up to $149.1 million compared with $149.7 million a year ago. Revenue is expected to fall further due to the fare reduction exercise which came into effect on April 1, 2009, and the increase in the transfer rebate.
Revenue from the group’s overseas bus operations continued to exceed those of its Singapore operations, accounting for $192.6 million or 55.0 per cent of total group bus revenue of $347.9 million.
Taxi business saw a 2.3 per cent decrease in Q1 revenue to $225.4 million. But in Singapore, taxi revenue was 5.8 per cent higher at $152.1 million due to a larger operating fleet and an increase in cashless transactions.
Revenue for the rail business continued to grow strongly, surging 10.5 per cent to $27.4 million.
SingTel – BT
SingTel’s Q4 net profit slides 17% to $903m
The company is proposing a final dividend of 6.9 cents a share
SINGAPORE Telecom’s fourth quarter profit may have suffered its steepest drop in recent years after a poor showing by regional associates, but the operator is in no hurry to do more shopping to help turn the tide.
‘Our growth strategy is not predicated on doing more M&As (mergers and acquisitions),’ said SingTel CEO Chua Sock Khoong.
Her comments follow recent overseas reports linking SingTel to a possible tie-up with cash-strapped Warid Telecom in Bangladesh. SingTel declined to comment on the reports.
It already owns a stake in another Bangladeshi operator called PBTL (Pacific Bangladesh Telecom Ltd), but the latter operates a CDMA (code division multiple access) cellular network instead of the more mainstream GSM networks used by most mobile subscribers there. SingTel also owns 30 per cent of Warid Telecom in Pakistan.
Aside from injecting more cash into PBTL and Warid, SingTel drew a blank on the foreign acquisitions front in the past 12 months. But this could change in the coming year should the global credit crunch throw up more candidates in dire need of an external cash injection.
‘SingTel continues to look for new investments in Asia and emerging adjacent markets and will be financially-disciplined in its evaluation of these opportunities,’ Ms Chua said.
The company, which derives 70 per cent of its Ebitda (earnings before interest, taxes, depreciation and amortisation) from overseas, yesterday reported a 17.3 per cent drop in Q4 net income to $903 million, from $1.09 billion a year earlier.
Q4 basic earnings per share tumbled 17.3 per cent to 5.68 cents, while operating revenue slid 5.1 per cent to $3.57 billion.
According to Ms Chua, the bottomline decline was caused by adverse currency movements during the quarter, coupled with lower contributions from SingTel’s two biggest regional associates – Thailand’s AIS and Indonesia’s Telkomsel.
Its wholly owned Australian unit Optus, which accounts for 29 per cent of group Ebitda, saw net profit rise 17 per cent for the three months ended March 31 to A$193 million (S$215 million). But the weaker Australian dollar dragged earnings down 7.8 per cent in Sing-dollar terms.
The strength of the Sing dollar also reduced pre-tax profit from SingTel’s six regional associates 22.4 per cent to $489 million in Q4.
AIS and Telkomsel led the plunge, their earnings diving 34 per cent and 41 per cent to $50 million and $163 million respectively.
Pre-tax profit from Globe in the Philippines fell 4 per cent to $78 million, while PBTL and Warid suffered losses of $3 million and $25 million respectively.
The sole bright spot among SingTel’s affiliated companies in Q4 was India’s Bharti, which saw pre-tax profit rise 1.4 per cent to $225 million in Q4.
‘We take a longer-term view of our investments. Not all of them are profitable from Day One,’ Lim Chuan Poh, CEO of SingTel International, told reporters at the firm’s results briefing.
SingTel’s Singapore home ground, however, proved resilient against the economic storm, with local Ebitda rising 20 per cent to $578 million in Q4.
Local earnings were lifted by higher revenue from the three key business units – data and Internet; mobile; and IT & engineering.
For its full 2009 financial year, SingTel’s net income fell 12.9 per cent to $3.45 billion despite a marginal 0.6 per cent increase in revenue to $14.9 billion.
It ended the year with free cash flow of $3.25 billion, down from $3.58 billion in 2008 due to higher capital outlays.
The company is proposing a final dividend of 6.9 cents a share, taking its full-year payout to 12.5 cents, unchanged from 2008. This is in line with its stated payout ratio of 45-60 per cent of underlying earnings, a range that also applies to SingTel’s current financial year, Ms Chua said.
Looking ahead, she expects earnings from its Singapore operations to remain stable while Optus’ Ebitda is projected to grow at a ‘single-digit level’.
Higher profits are also expected of Bharti and Telkomsel in local currency terms this year.
SingTel shares closed 0.7 per cent higher at $2.74 yesterday.
SingTel – DBS
Spectacular show
At a Glance
• Underlying net profit of S$959m was 13% ahead of ours and consensus expectations.
• Singapore and Australia surprised with significant EBITDA improvement both sequentially and annually.
• We are revising our FY10F by 6% expecting Singapore and Australia to continue to deliver. Upgrade to BUY with revised SOTP target price of S$3.05.
Comment on Results
Underlying net profit of S$949m (-0.9% yoy) was up 15% qoq mainly due to three reasons (i) Singapore EBITDA of S$578m (+3% yoy) improved 3.1% sequentially despite weak economy as corporate data and mobile services showed no weakness while costs were lower (ii) Excluding tax credits, tax rate for Singapore was around 10%, lower than our 17% expectations (iii) Optus EBITDA (+8.5% yoy) improved 14.5% sequentially due to significant improvement in both revenue and margins in the mobile segment.
Management guidance for FY10F
Singapore guidance. Single digit growth in Singapore revenue, 36- 38% EBITDA margins lower than 39% in FY09, implying flat EBIDTA. Capex below S$800m compared to s$736m in FY09, as such management expects slight decline in free cash flow.
Australia guidance. Low single digit growth in operating revenue and EBITDA, with growth in mobile and wireless broadband. Capex of about A$1.1b, mainly in mobile network, compared to A$1.0b in FY09. Free cash flow is expected to be stable.
Associate guidance. Growth in local currency earnings of Bharti and Telkomsel. Management expects lower ordinary dividends from the regional mobile associates as Telkomsel and Globe reported lower profits in 2008.
We have revised up our FY10F and FY11F estimates by 6% each. Upgrade to BUY with revised TP of S$3.05.
MIIF – BT
MIIF Q1 profit more than doubles to $23.4m
MACQUARIE International Infrastructure Fund (MIIF) yesterday reported a net profit attributable to equity holders of $23.4 million for the first quarter ended March 31, 2009 – more than twice the $9.2 million figure a year ago.
The increased takings resulted from higher investment income, a higher foreign exchange gain and lower operating expenses.
‘We have seen markets, especially for our patronage assets in China and Europe, worsen through the start of 2009,’ said the CEO of MIIF’s manager, John Stuart.
The amount of debt held in some of MIIF’s businesses may be unsustainable amid tight European debt markets, and these businesses may have to tackle the situation in the short term, he said. ‘As a result, we are likely to see some pressure on MIIF’s investment income over the remainder of the year.’
MIIF amended its dividend policy late last year, retaining surplus cash to repay corporate-level debt. It said it hoped to fully repay this debt by end-2009.
In Q1, however, standalone company borrowings rose from $20 million at Dec 31, 2008 to $50.1 million at March 31. The increase was largely due to a temporary $30 million drawdown for MIIF’s 2008 final dividend and an equity investment.
At April 30, 2009, the borrowings stood at $35 million. MIIF expects this to fall when it receives distributions from its Chinese port and expressway businesses in Q3 2009.
‘If debt markets remain challenging, it may be necessary for borrowing levels within certain businesses to be reduced,’ MIIF said. If these businesses amortise certain debt facilities ahead of maturity, ‘receipts from the underlying businesses would be reduced with a commensurate effect on MIIF’s ability to make distributions to shareholders’.
MIIF units lost two cents yesterday to close at 38.5 cents.