Category: SingTel
TELCOs – OCBC
4QCY13 results mostly tracking our estimates
- All largely in line
- Outlook still muted
- Yields are bit more decent
StarHub missed our forecast
Both M1 and SingTel reported 4QCY13 results that came in within our expectations, while StarHub’s results tracked below forecast. M1’s core FY13 earnings was 3.5% above our full-year forecast and SingTel’s 9MFY14 earnings met 73% of our FY14 estimate. But due to lower-than-expected EBITDA margin, StarHub’s core FY13 earnings was 5% below our forecast. Interestingly, M1 declared a special dividend, which brought its total payout to 121% of earnings; StarHub kept its payout at S$0.20 as guided.
Review of Singapore mobile operations
Total post-paid mobile subscribers grew by a stronger-than-expected 2% QoQ to 4.53m in the Dec quarter, led by StarHub (+5.2%), SingTel (+1.1%), then M1 (+0.4%). Meanwhile, the decline in monthly ARPUs appears to be stabilizing; and telcos are optimistic that ARPUs should improve as more subscribers switch over to the new tiered pricing plans with less generous data bundles.
Little change to FY14 outlook
M1 continues to expect moderate single-digit earnings growth, although capex will be slightly higher at S$130m (versus S$125m in FY13). SingTel still sees mid-single digit decline in group revenue and low-single digit fall in EBITDA for FY14 (ending 31 Mar); but expects lower S$2.2b capex spend versus S$2.5b guided previously. StarHub is still guiding for low single-digit revenue growth with 32% EBITDA margin (vs. 32.9% in FY13).
Yields are still decent
As before, the spectre of rising interest rates is looming; but the recent pullback in the telcos’ share prices is starting to bring dividend yields back towards the 5% handle (4.8% average forecast). Hence we think that these stocks should continue to have a place in any portfolio also for their defensive earnings. Maintain NEUTRAL on the sector.
TELCOs – OCBC
4QCY13 results mostly tracking our estimates
- All largely in line
- Outlook still muted
- Yields are bit more decent
StarHub missed our forecast
Both M1 and SingTel reported 4QCY13 results that came in within our expectations, while StarHub’s results tracked below forecast. M1’s core FY13 earnings was 3.5% above our full-year forecast and SingTel’s 9MFY14 earnings met 73% of our FY14 estimate. But due to lower-than-expected EBITDA margin, StarHub’s core FY13 earnings was 5% below our forecast. Interestingly, M1 declared a special dividend, which brought its total payout to 121% of earnings; StarHub kept its payout at S$0.20 as guided.
Review of Singapore mobile operations
Total post-paid mobile subscribers grew by a stronger-than-expected 2% QoQ to 4.53m in the Dec quarter, led by StarHub (+5.2%), SingTel (+1.1%), then M1 (+0.4%). Meanwhile, the decline in monthly ARPUs appears to be stabilizing; and telcos are optimistic that ARPUs should improve as more subscribers switch over to the new tiered pricing plans with less generous data bundles.
Little change to FY14 outlook
M1 continues to expect moderate single-digit earnings growth, although capex will be slightly higher at S$130m (versus S$125m in FY13). SingTel still sees mid-single digit decline in group revenue and low-single digit fall in EBITDA for FY14 (ending 31 Mar); but expects lower S$2.2b capex spend versus S$2.5b guided previously. StarHub is still guiding for low single-digit revenue growth with 32% EBITDA margin (vs. 32.9% in FY13).
Yields are still decent
As before, the spectre of rising interest rates is looming; but the recent pullback in the telcos’ share prices is starting to bring dividend yields back towards the 5% handle (4.8% average forecast). Hence we think that these stocks should continue to have a place in any portfolio also for their defensive earnings. Maintain NEUTRAL on the sector.
SingTel – MayBank Kim Eng
A Shin deal has to make sense
- That SingTel would want to buy a stake in Shin Corp from Temasek does not make any sense that we can see.
- The telco already has all it needs; more exposure to Thailand would raise political risk and strain its balance sheet.
- But if the deal happens at the reported price, it would be a negative for SingTel. Maintain HOLD.
What’s New
Reuters reported yesterday that Temasek Holdings may sell its 41.6% stake in Thailand’s Shin Corporation (renamed Intouch PLC), with SingTel named as a potential bidder. The value of the stake, at the current market price, is SGD3.9b or USD3.1b.
What’s Our View
Our initial reaction is that it does not make sense, or at least none that we can visibly see, for SingTel to buy Shin. But should it happen at the reported price, this may be negative for SingTel.
First, SingTel already has a sizeable stake in AIS. SingTel already has a direct exposure to Thailand via a 23.3% stake in the country’s largest mobile telco, Advanced Information Services (AIS). We believe SingTel is primarily interested in AIS’s mobile telecom business. AIS, which has a market share of 44% in Thailand, is Shin’s crown jewel that contributes almost all of its profits.
Second, it raises the political risk too much. Taking a substantial stake in Shin will mean SingTel’s exposure to Thailand’s political risks may be too much for our liking. If SingTel were to pay SGD3.9b (USD3.1b) for Temasek’s stake, its investment in Thailand will exceed SGD5b, making the country its biggest exposure to any associate market, bigger than India and Indonesia.
Third, gearing would explode. SingTel’s net debt/EBITDA is already 1.0x. Adding another SGD3.9b in debt would raise it to 1.5x (or 2.2x if associates’ contribution is removed from the calculation to be consistent with StarHub and M1).
SingTel – MayBank Kim Eng
A Shin deal has to make sense
- That SingTel would want to buy a stake in Shin Corp from Temasek does not make any sense that we can see.
- The telco already has all it needs; more exposure to Thailand would raise political risk and strain its balance sheet.
- But if the deal happens at the reported price, it would be a negative for SingTel. Maintain HOLD.
What’s New
Reuters reported yesterday that Temasek Holdings may sell its 41.6% stake in Thailand’s Shin Corporation (renamed Intouch PLC), with SingTel named as a potential bidder. The value of the stake, at the current market price, is SGD3.9b or USD3.1b.
What’s Our View
Our initial reaction is that it does not make sense, or at least none that we can visibly see, for SingTel to buy Shin. But should it happen at the reported price, this may be negative for SingTel.
First, SingTel already has a sizeable stake in AIS. SingTel already has a direct exposure to Thailand via a 23.3% stake in the country’s largest mobile telco, Advanced Information Services (AIS). We believe SingTel is primarily interested in AIS’s mobile telecom business. AIS, which has a market share of 44% in Thailand, is Shin’s crown jewel that contributes almost all of its profits.
Second, it raises the political risk too much. Taking a substantial stake in Shin will mean SingTel’s exposure to Thailand’s political risks may be too much for our liking. If SingTel were to pay SGD3.9b (USD3.1b) for Temasek’s stake, its investment in Thailand will exceed SGD5b, making the country its biggest exposure to any associate market, bigger than India and Indonesia.
Third, gearing would explode. SingTel’s net debt/EBITDA is already 1.0x. Adding another SGD3.9b in debt would raise it to 1.5x (or 2.2x if associates’ contribution is removed from the calculation to be consistent with StarHub and M1).
SingTel – OSK DMG
Some FX Reprieve
At 69-73%, SingTel’s 9MFY14 results were slightly below our expectations but in line with consensus. The improvement in Optus’ cost structure and a steadier SGD/AUD mitigated a seasonally weaker Singapore business. Our forecast is under review pending the results call with management later today. SingTel stays NEUTRAL on lack of re-rating catalyst and competitive headwinds.
Broadly in line. SingTel’s 3QFY14 core earnings of SGD910m (+3.9% y-oy, 2.8% q-o-q) brought 9MFY14 core earnings to SGD2.69bn (+3.1% y-o-y). A reprieve is seen from the recovery in the AUD and INR vs the SGD q-o-q (feeding into 1QCY14), although the IDR and THB depreciated another 2-10% q-o-q.
Seasonal uptick in mobile revenue. As expected, SingTel’s consumer revenue (-11% y-o-y) was clipped by the double-digit decline in Optus (80% of revenue) from lower mobile termination rates (MTR). It rose 4% q-o-q on the high base of seasonal sales in 4QFY13. Group enterprise revenue was stable on the back of the cautious business environment. The improved cost structure (mostly at Optus) contributed to the y-o-y EBITDA growth but was down q-o-q on seasonality.
Associate contribution up 4% y-o-y. Bharti Airtel (BHARTI IN, NR) posted an improved showing (higher ARPU and data usage), but rising competition and 3G related costs dragged down Advanced Info Service (ADVANC TB, BUY, TP: THB2.48)’s contribution (+1% y-o-y). Telkomsel (+15% y-o-y) benefited from a stable market and higher data usage.
Digital business (GDL) in embryonic stage. Although revenue momentum improved further in 3QFY14 (+14.3% q-o-q/+40% y-o-y), EBITDA losses widened to SGD114m in 9MFY14 from SGD72m in 1HFY14. The bulk of the revenue came from Amobee.
Guidance tweaked. Management has reiterated its broad guidance of: i) Singapore revenue to increase by low single-digits, ii) Optus revenue to decline by mid-single digits, and iii) GDL to incur start-up losses. It has, however tweaked guidance for group consumer revenue to “decline by low double-digits” from a “decline of high single-digits”.