SingTel – OCBC
SLOW FY13 START; LOWER S$3.61 FV
- Core earnings 22% of FY13
- Hit by weaker regional currencies
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BUY as total return >10%
Soft FY13 start
SingTel reported its 1QFY13 results this morning, with revenue falling 1.6% YoY to S$4533.0m, meeting around 24% of our full-year forecast; impacted by the 3% depreciation in the AUD against the SGD. Reported net profit came in around S$945.3m, up 3.2% YoY, which included an exceptional gain of S$102.2m. Core net profit (excluding exceptional items) slipped 2.6% YoY to around S$850.0m, or 22% of our FY13 estimate. On a sequential basis, revenue fell 5.2% and core earnings was down 16.9%.
Regional currencies take toll on associate earnings
One of the key reasons for the fall was due to lower Associates' net contribution, which fell 14.7% YoY to S$354.0m, mainly due to the weakening of the regional currencies (especially INR and IDR against the SGD). But on a constant regional currency terms, pre-tax Associates' contribution grew 5.6%, where strong operating performance from Telkomsel and AIS partially offset Bharti Airtel's weaker results.
Reaffirms FY13 guidance
SingTel expects consolidated revenue in FY13 to grow at a low single digit level and EBITDA to remain stable; although this implies potential EBITDA margin pressure, which could arise from initial startup costs associated with its Group Digital Life segment. Meanwhile, free cash flow (excluding associate dividends) is estimated to be around S$2.6b, after allocating S$950m of capex in Singapore and A$1.1b in Australia. SingTel also expects ordinary dividends from regional mobile associates to grow and its own dividend payout ratio to be maintained at 55-70%.
Lower S$3.61 fair value
While 1Q results were slightly below forecast, we opt to leave our FY13 estimates unchanged for now. However, our SOTP-based fair value drops from S$3.68 to S$3.61 to reflect the recent drop in Bharti Airtel's share price. But as the total return from here is still >10%, we maintain our BUY rating.
ComfortDelgro – Kim Eng
Taxiing to Another Profitable Quarter
Decent 2Q2012 results; Taxis lead again. ComfortDelGro (CDG) reported a NPATMI of SGD65.0m for 2Q2012, an 8.5% increase YoY. Although profits were boosted by a SGD7m increase in Automotive Engineering Services profit, the Taxi business continued to contribute most significantly to the bottom-line (34.7% of operating profit). An interim dividend of SG 2.9 cts was declared, 7.4% higher YoY.
Broad-based revenue growth. CDG’s 2Q2012 financial performance was notable because revenue growth was recorded across almost every business segment. Out of CDG’s core transport segments, Taxi revenue led the way with a 9% increase YoY to ~SGD280m.
Buses a drag, but expectations are low. Of some concern is the Singapore Bus segment, which saw a 65% YoY decrease in operating profit to SGD1.7m, kept afloat with help from advertising and rental revenue. While expectations remain low for the bus business on higher costs, a positive catalyst remains a favourable review of the public transport fare framework by early 2013.
Strength in diversity; Outlook largely positive. 41% of revenue and 45% of operating profit were contributed by CDG’s overseas businesses. Once again, this geographical diversity of the group’s business model allowed CDG to post decent results despite challenges faced by the local public transport operators. Management also guided towards a largely positive revenue outlook, with cost management cited as a key point of focus for the group.
CDG preferred in Land Transport sector, maintain BUY. We roll forward our 16x PER valuation to FY2013 EPS, increasing our Target Price to SGD1.94. We maintain our BUY recommendation based on CDG’s resilient earnings, complemented by its geographically diversified business, both of which support steady, growing dividend payouts. Investors buying in within this week will enjoy the interim dividend declared of SG 2.9 cts, payable on 31 Aug 2012.
ComfortDelgro – Kim Eng
Taxiing to Another Profitable Quarter
Decent 2Q2012 results; Taxis lead again. ComfortDelGro (CDG) reported a NPATMI of SGD65.0m for 2Q2012, an 8.5% increase YoY. Although profits were boosted by a SGD7m increase in Automotive Engineering Services profit, the Taxi business continued to contribute most significantly to the bottom-line (34.7% of operating profit). An interim dividend of SG 2.9 cts was declared, 7.4% higher YoY.
Broad-based revenue growth. CDG’s 2Q2012 financial performance was notable because revenue growth was recorded across almost every business segment. Out of CDG’s core transport segments, Taxi revenue led the way with a 9% increase YoY to ~SGD280m.
Buses a drag, but expectations are low. Of some concern is the Singapore Bus segment, which saw a 65% YoY decrease in operating profit to SGD1.7m, kept afloat with help from advertising and rental revenue. While expectations remain low for the bus business on higher costs, a positive catalyst remains a favourable review of the public transport fare framework by early 2013.
Strength in diversity; Outlook largely positive. 41% of revenue and 45% of operating profit were contributed by CDG’s overseas businesses. Once again, this geographical diversity of the group’s business model allowed CDG to post decent results despite challenges faced by the local public transport operators. Management also guided towards a largely positive revenue outlook, with cost management cited as a key point of focus for the group.
CDG preferred in Land Transport sector, maintain BUY. We roll forward our 16x PER valuation to FY2013 EPS, increasing our Target Price to SGD1.94. We maintain our BUY recommendation based on CDG’s resilient earnings, complemented by its geographically diversified business, both of which support steady, growing dividend payouts. Investors buying in within this week will enjoy the interim dividend declared of SG 2.9 cts, payable on 31 Aug 2012.
SingTel – DBSV
Bharti confirms intense competition
- Bharti’s earnings were 37% below consensus estimate due to intensified competition
- Bharti to remain aggressive in maintaining its revenue share. SingTel’s FY13F/14F trimmed 2%/3%.
- HOLD with lower TP of S$3.25. Near-term cost pressures from mobile advertising in Singapore is another concern
Bharti hurt by rising competition with net profits 37% below expectations. 1Q13 profit of Rs.7.6bn (-37% y-o-y and -34% q-o-q) was 37% below consensus expectations of Rp12.15bn due to a sharp decline in EBITDA margins in India to 31.8% from 35.3% in March 2012, because of rising expenses. High depreciation and finance expenses in Africa had resulted in losses from Africa widening by 120% y-o-y to Rs. 6.7bn.
We had highlighted rising competition in our note on 2 July. Indian operators, including Bharti had lowered tariffs to 0.5 paisa per sec from 1.0 paisa through discount vouchers. At the same time, dealer commissions have also been raised substantially.
SingTel’s earnings trimmed slightly. Bharti is not willing to lose revenue share and intends to remain aggressive in preventing that from happening. We have lowered Bharti’s FY13F/14F earnings by 30% each, implying flat earnings in FY13F (with downside risks). After raising contribution from AIS and Telkomsel slightly, our SingTel’s FY13/14F earnings are trimmed 2%/3% respectively.
Maintain HOLD with slightly lower TP of S$3.25. The key change is lower valuation for Bharti based on the market price of Rs 255 per share. For SingTel, dividend yield of 5% remains the key attraction as growth is not exciting enough.
SingTel – DBSV
Bharti confirms intense competition
- Bharti’s earnings were 37% below consensus estimate due to intensified competition
- Bharti to remain aggressive in maintaining its revenue share. SingTel’s FY13F/14F trimmed 2%/3%.
- HOLD with lower TP of S$3.25. Near-term cost pressures from mobile advertising in Singapore is another concern
Bharti hurt by rising competition with net profits 37% below expectations. 1Q13 profit of Rs.7.6bn (-37% y-o-y and -34% q-o-q) was 37% below consensus expectations of Rp12.15bn due to a sharp decline in EBITDA margins in India to 31.8% from 35.3% in March 2012, because of rising expenses. High depreciation and finance expenses in Africa had resulted in losses from Africa widening by 120% y-o-y to Rs. 6.7bn.
We had highlighted rising competition in our note on 2 July. Indian operators, including Bharti had lowered tariffs to 0.5 paisa per sec from 1.0 paisa through discount vouchers. At the same time, dealer commissions have also been raised substantially.
SingTel’s earnings trimmed slightly. Bharti is not willing to lose revenue share and intends to remain aggressive in preventing that from happening. We have lowered Bharti’s FY13F/14F earnings by 30% each, implying flat earnings in FY13F (with downside risks). After raising contribution from AIS and Telkomsel slightly, our SingTel’s FY13/14F earnings are trimmed 2%/3% respectively.
Maintain HOLD with slightly lower TP of S$3.25. The key change is lower valuation for Bharti based on the market price of Rs 255 per share. For SingTel, dividend yield of 5% remains the key attraction as growth is not exciting enough.