SingTel – BT
Bharti's profit falls for 9th straight quarter
Bharti Airtel, India's biggest mobile-phone carrier by subscribers, reported its ninth straight quarterly profit decline, hurt by intense price competition, higher interest costs and foreign-exchange fluctuation losses.
The company, controlled by billionaire Sunil Mittal, has lost market share in the past year to smaller rivals in the country's fiercely competitive mobile market, where carriers operate on wafer-thin margins with cheap voice calls accounting for a bulk of revenue.
Mobile data, which offers higher margins, is at a nascent stage in India, and the takeoff of premium third-generation data services has been slower than what the industry had initially expected in a price-sensitive market.
Cellular operators, including Vodafone's local unit, have also been hit by fresh uncertainty in recent months after a court ordered cancellation of all mobile-phone permits awarded in a scandal-tainted sale in 2008.
SMRT – CIMB
Watch out for falling dividends
SMRT faces intensifying headwinds from an ongoing inquiry into its service disruptions. Asset renewal will call for higher capex, while mandates for more stringent repairs and maintenance will elevate its cost structure permanently, eating into profits.
FY12 core misses expectations at 85% of our FY12 and consensus due to goodwill impairment for its bus business. We cut our FY13-14 EPS by 7-8% to incorporate higher opex. Our DCF target (WACC: 6.6%) falls accordingly. Maintain Underperform.
Cash cow no more
What surprised us was a reduction in dividends this quarter, reaffirming our suspicion that SMRT will need to lower its payouts. FY12 dividends totalled 7.45cts, below our 8.5ct forecast, which was culled from management’s earlier guidance of maintaining last year’s absolute payout. We have pre-emptively cut our payout assumptions to 60% of PATMI, lowering forward yields to less than 4%.
With a planned hike in capex for fleet expansion and asset renewal, SMRT could slip into net debt in FY13. Capex will be funded by its MTN programme and debt.
Cost pressure persists
Cashflow strains aside, SMRT continued to contend with margin erosion in 4Q12. Higher repair/maintenance costs and costlier energy erased the benefits of revenue growth from higher ridership. A S$21.7m goodwill impairment for its bus business further ate into profits, causing a 10.4%-pt slump in EBIT margins. We expect a structural increase in SMRT’s cost structure from stricter repair and maintenance mandates.
Poor prospects
Plagued by margin erosion and cashflow strains, we see no reason to own this stock. Further, dividend yields are no longer attractive. Switch to ComfortDelGro for exposure to Singapore’s land transport sector.
RafflesMed – BT
Raffles Med posts 11% gain in Q1 profits
Raffles Medical Group posted net profit of S$11.6 million in the first quarter of 2012, an increase of 10.9 per cent from the same period last year.
The Group said that the increase was due to an overall improved operating performance driven by higher patient load and patient acuity.
As at 31 Mar, the Group had a healthy cash position of S$61.1 million.
Revenue rose 13.2 per cent to S$72.9 million from S$64.4 million last year.
SMRT – BT
SMRT cuts dividend as Q4 profit drops 59%
Singapore's main subway operator SMRT Corp Ltd reported on Monday a 59 per cent drop in fiscal fourth-quarter net profit, hurt by higher operating expenses and impairment of goodwill on its bus operations.
The company earned S$13.9 million (US$11.2 million) in the three months ended March, down from S$34 million a year earlier.
Singapore Mass Rapid Transit (SMRT) declared a reduced final dividend of 5.70 Singapore cents compared with 6.75 cents a year ago.
SMRT shares have fallen around 7 per cent since it said last week it would spend S$900 million to overhaul the train system following numerous breakdowns in recent months. Part of the cost will be borne by the government's Land Transport Authority (LTA).
SingPost – OCBC
DIVIDENDS LIKELY TO REMAIN INTACT DESPITE TRANSFORMATION
•Results largely in line
•In midst of transformation
•Declares 2.5 S cents final dividend
FY12 results largely within expectations
Singapore Post (SingPost) reported a 2.2% rise in revenue to S$578.5m but saw an 11.8% fall in net profit to S$142.0m in FY12, accounting for 101% and 95% of our full-year estimates, respectively. Administrative and other expenses, which increased 12.5% YoY and 4.2% QoQ in 4QFY12, were slightly higher than expected. On a segmental breakdown, the logistics and retail divisions posted improved revenues in 4QFY12, while mail turnover remained steady as growth in international mail and philatelic revenue offset the decline in domestic and hybrid mail contributions.
Dividends should remain intact
Besides acquiring stakes in companies to grow its businesses, SingPost invested S$9.7m in the upgrading of talent, IT systems and processes in FY12. The group is pursuing a transformation programme for its future but we do not see this impacting the group’s dividend payouts. We note that SingPost’s free cashflow payout ratio has been in the comfortable range of 60-80% since FY07, and are forecasting a 78.6% ratio for FY13F, based on an expected full-year dividend of 6.25 S cents.
Financial impact of perpetual securities
SingPost’s perpetual securities will be classified as equity for accounting purposes, but we understand it will be treated as debt from a tax perspective. The perps should not result in higher interest expense in the income statement, as the preferred dividends are paid post-tax. If, however, some of the proceeds are used to pay off debt, interest expense may even be lower. Meanwhile, the group’s gearing will be lower from a bank’s perspective.
Maintain BUY
Similar to last year, SingPost has declared a final dividend of 2.5 S cents per share, bringing the total dividend for the year to 6.25 S cents. The stock price has risen by about 9.0% since we upgraded it from Hold on 5 Jan, but we still see an upside potential of 17.3% (inclusive of a forecasted dividend yield of 6.1%) based on our DDMderived fair value estimate of S$1.14. Maintain BUY.