Category: SingTel
SingTel – CIMB
Strong finish to FY13, but weak FCF in FY14
FY13 core was 4% above our forecast and 3% above consensus on surprises at Telkomsel, AIS and Globe. Optus slightly disappointed but Singapore was in line. SingTel guides for a 30% drop in FCF in FY14 (ex-associate dividends) on flat revenue and a 25% surge in capex.
It will be allocating S$2bn to investments in the digital business over the next three years. It declared a final DPS of 10cts for a total of 16.8 cts (74% payout) vs. 15.8 cts in FY12 (69%). We tweak our FY14-15 EPS and keep our SOP target price for now. SingTel remains an Underperform with de-rating catalysts expected from disappointing FC. M1 remains our top Singapore telco pick.
Australia and Singapore
Operationally, Optus’s 4Q was slightly below expectations with still-weak net adds and cost savings behind its EBITDA growth. Revenue fell 5% yoy, while EBITDA grew 3%. SingTel Singapore met our expectations, backed by market-share gains in mobile, fixed broadband and pay TV.
Associates saved the year
Telkomsel’s, AIS’s and Globe’s earnings surprised positively thanks to growth in subscribers and mobile data. AIS’s contributions were further bolstered by a 2% appreciation of the THB vs. S$ and lower corporate taxes starting Jan 13. Bharti was the main drag among its associates on higher depreciation/amortisation in Africa and an 11% depreciation of the Rs/S$.
Muted outlook
SingTel’s guidance paints to another muted year for Australia and Singapore (Figure 1). It expects FY14: 1) revenue to be flat after declining 3% yoy, with single-digit growth in Singapore offset by lower revenue for Optus from lower mobile interconnection rates; and 2) EBITDA to rise by low single digits on the back of efficiency gains. More importantly, FY14 free cash flow is expected to fall 30% yoy on the back of a 25% surge in capex as Australia and Singapore invest in LTE and 3G.
SingTel – CIMB
Strong finish to FY13, but weak FCF in FY14
FY13 core was 4% above our forecast and 3% above consensus on surprises at Telkomsel, AIS and Globe. Optus slightly disappointed but Singapore was in line. SingTel guides for a 30% drop in FCF in FY14 (ex-associate dividends) on flat revenue and a 25% surge in capex.
It will be allocating S$2bn to investments in the digital business over the next three years. It declared a final DPS of 10cts for a total of 16.8 cts (74% payout) vs. 15.8 cts in FY12 (69%). We tweak our FY14-15 EPS and keep our SOP target price for now. SingTel remains an Underperform with de-rating catalysts expected from disappointing FC. M1 remains our top Singapore telco pick.
Australia and Singapore
Operationally, Optus’s 4Q was slightly below expectations with still-weak net adds and cost savings behind its EBITDA growth. Revenue fell 5% yoy, while EBITDA grew 3%. SingTel Singapore met our expectations, backed by market-share gains in mobile, fixed broadband and pay TV.
Associates saved the year
Telkomsel’s, AIS’s and Globe’s earnings surprised positively thanks to growth in subscribers and mobile data. AIS’s contributions were further bolstered by a 2% appreciation of the THB vs. S$ and lower corporate taxes starting Jan 13. Bharti was the main drag among its associates on higher depreciation/amortisation in Africa and an 11% depreciation of the Rs/S$.
Muted outlook
SingTel’s guidance paints to another muted year for Australia and Singapore (Figure 1). It expects FY14: 1) revenue to be flat after declining 3% yoy, with single-digit growth in Singapore offset by lower revenue for Optus from lower mobile interconnection rates; and 2) EBITDA to rise by low single digits on the back of efficiency gains. More importantly, FY14 free cash flow is expected to fall 30% yoy on the back of a 25% surge in capex as Australia and Singapore invest in LTE and 3G.
SingTel – Lim & Tan
- Fiscal 4Q ’13 net profits at Singtel came in at S$868 million, down 33% y-o-y, as a result of (1) a one-time loss of S$225 million from the divestment of Warid Pakistan and (2) an exceptional tax credit of S$270million in the same period last year. This is in line with consensus numbers.
- Excluding exceptional items, Singtel’s underlying quarterly net profit would have just declined 2% y-oy. The operating weakness came mainly from unfavourable foreign currency movements, as well as investments in network, digital initiatives and spectrum.
- Its overseas business registered just a 1% increase in pre-tax profits (S$514 million), as strong contributions from Telkomsel and AIS offset poorer performance from Bharti Airtel.
- The telecommunication company increased its dividend payout ratio, bringing its full-year dividends to 16.8 cents per share. This translates into a dividend yield of 4.2% for FY ’13.
- Looking ahead, Singtel foresees its revenue from its Group Consumer unit to decline by low single digit level due to lower anticipated contributions from Australia. Overall, consolidated revenue for the Group is expected to be stable, growing at low single digit, supported by productivity and yield management initiatives.
SingTel – Lim & Tan
- Fiscal 4Q ’13 net profits at Singtel came in at S$868 million, down 33% y-o-y, as a result of (1) a one-time loss of S$225 million from the divestment of Warid Pakistan and (2) an exceptional tax credit of S$270million in the same period last year. This is in line with consensus numbers.
- Excluding exceptional items, Singtel’s underlying quarterly net profit would have just declined 2% y-oy. The operating weakness came mainly from unfavourable foreign currency movements, as well as investments in network, digital initiatives and spectrum.
- Its overseas business registered just a 1% increase in pre-tax profits (S$514 million), as strong contributions from Telkomsel and AIS offset poorer performance from Bharti Airtel.
- The telecommunication company increased its dividend payout ratio, bringing its full-year dividends to 16.8 cents per share. This translates into a dividend yield of 4.2% for FY ’13.
- Looking ahead, Singtel foresees its revenue from its Group Consumer unit to decline by low single digit level due to lower anticipated contributions from Australia. Overall, consolidated revenue for the Group is expected to be stable, growing at low single digit, supported by productivity and yield management initiatives.
TELCOs – OSK DMG
SingTel Asked To Cross-Carry BPL Content
Singapore’s Media Development Authority (MDA) has directed SingTel to cross-carry the Barclays Premier League (BPL) for the 2013-2016 season starting in August. We are surprised by the directive but view it as favorable for StarHub as it would help to mitigate pay-TV churn. StarHub subscribers would now have access to the iconic content without a second set-top box. The decision is, however, negative for SingTel as it has to share content as well as bear the associated cross carriage costs despite having signed for the BPL on non-exclusive terms. We are keeping our NEUTRAL ratings on both companies given the recent strong share price re-rating for the sector. StarHub remains our preferred exposure to Singapore telecoms.
Getting a fair play. MDA’s directive was in response to the complaint filed by StarHub in February on its inability to negotiate for separate rights to the BPL. Media reports have said that SingTel had built in ‘restrictive conditions’ after inking the non-exclusive agreement with the Football Association Premier League (FAPL). This was said to have prevented the FAPL from commencing negotiations with other parties for an extended period of time.
Positive for StarHub. StarHub welcomes the development and sees pay-TV subscribers as the ultimate beneficiaries. We gather from management that it had capitalized on a provision within the cross carriage guidelines which stipulate that non-exclusive content can be shared if the agreement signed by another provider contained certain clauses which prevent or restrict, or are likely to prevent or restrict, the same content from being acquired or otherwise obtained for transmission on selected pay-TV platforms in Singapore.
SingTel to file an appeal. SingTel said it is “gravely disappointed” with MDA’s decision as it would ”disadvantage” both consumers and the industry. The company would appeal the decision and seek legal recourse, if necessary. Management believes the directive will discourage pay-TV operators from acting swiftly in the future to procure top quality content as this penalizes the operator and would see consumers losing out since it may no longer be economically viable for broadcasters to continue investing in quality programming for the benefit of consumers and businesses.
The red camp may play hardball. We believe SingTel could still make it difficult for StarHub’s subscribers to access the BPL with commercial terms of carriage that may be less favorable. SingTel is caught in a bind as it is mandated to charge other viewers the same rate it charges its own customers. The directive is negative for SingTel as it forces the company to share the content – although signed on a non-exclusive basis – and bear all costs associated with the carriage cost.