SingTel – BT
SingTel bets US$321m on mobile ads
In the battle against the disruptive influence of smartphones on voice call and SMS revenues, SingTel is fighting back with a US$321 million acquisition of Silicon Valley mobile advertising firm Amobee.
As part of its virgin investment in a digital services firm, SingTel will trade its customer data for Amobee’s mobile ad savvy as it tries to crack mobile marketing in emerging markets such as India and Indonesia. These markets account for a growing portion of SingTel’s 434 million customers.
The acquisition of the 100 per cent stake in Amobee will be an all-cash one and will give SingTel access to more refined marketing tools like targeted deals and coupons for its subscribers. The deal is slated to be completed before June.
At the same time, SingTel will use its position as a telco to fill in the blanks in demographic information that have frustrated marketers thus far. ‘There’s a wealth of data that’s available – age, gender, socio-economic status . . . handset model, real-time location – gathered with customers’ permission,’ said Allen Lew, SingTel’s newly designated head of digital business.
While the US$321 million investment works out to a price-to-net-asset-value ratio of 535 based on Amobee’s net asset value (NAV) of US$0.6 million, SingTel Group CEO Chua Sock Koong said that the telco had considered the discounted cash flow (DCF) valuation parameters of other deals and that its valuation of Amobee was ‘in line with market parameters’.
A report by DMG & Partners Research yesterday said that the SingTel- Amobee valuations implied a price-to-sales ratio of 11 – below similar deals’ price- to-sale ratios ranging from 13 to 30.
In previous years, Google and Apple have been involved in large-scale buyouts of mobile advertising firms – AdMob and Quattro Wireless – respectively. Google paid US$750 million for AdMob while Apple reportedly paid US$275 million for Quattro Wireless.
In that respect, the DMG report deemed the Amobee valuation ‘fair’ and placed it on the ‘low end of similar benchmarks’.
While the largest spate of mobile ad firm buyouts happened in 2007, heavyweight interest in mobile advertising appears set to continue into the year, with Facebook courting mobile ads and Starbucks working with mobile ad firm Celtra on a campaign.
SingTel’s designs on this space are similarly ambitious. The telco said yesterday that it wanted to not only be the top mobile ad firm in the region but to also rank among the top three in the world.
If it achieves this, it will have leapt across a rather large distance in the mobile advertising landscape, considering its starting point.
Mr Lew said that up till now, ‘most of (SingTel’s) efforts have been SMS- and MMS-based. We have not participated in the agency aspect of mobile advertising or creative design.’
The DMG report also said the research house viewed the deal ‘as positive for SingTel given Amobee’s expansive platform covering the entire value chain of mobile advertising’.
‘This will allow the group to capitalise on and further monetise mobile advertising across the (operating companies),’ it added.
DBS Group Research’s Sachin Mittal noted, however, that ‘mobile advertising is a promising area but selling solutions is something new for SingTel’.
In the mobile ad field, the stakes appear to get larger every year. Gartner data cited by SingTel showed that global revenue from mobile ads is set to grow from US$6.8 billion this year to US$20.6 billion in 2015 – of which Asia Pacific is expected to account for 35 per cent.
This deal was announced alongside a sweeping organisation reshuffle that points to a growing focus on SingTel’s digital interests.
From April 1, SingTel Group will have three main business units: consumer, digital services, and information technology for enterprises.
Mr Lew will serve as CEO of the group digital business, while Paul O’Sullivan – who heads up the Optus business – will be CEO of the group consumer end.
The search for someone to lead its IT segment for enterprises, however, continues, with Mr Lew standing in meanwhile.
‘This reflects the focus on selling innovative solutions rather than being an operator in an era where voice is being commoditised and the value is in selling solutions,’ DBS’s Mr Mittal commented in his note yesterday.
The group’s counter closed two cents lower at $3.13 in trading yesterday.
SingTel – BT
SingTel’s US$700m, 5.5-year notes over 4 times subscribed
Three traded perpetual securities see varied performances
SINGTEL’s sale of US$700 million, 5.5-year notes yesterday met with strong demand as the debt market continued to sizzle. The order book for the bonds, which pay a coupon of 2.375 per cent, came to about US$3.25 billion and was more than four times subscribed by investors, said SingTel in a statement.
But those looking for a quick buck trading some of the highly popular perpetual securities are finding that not all perps are the same.
Genting’s 5.125 per cent was selling at $100.65 but SingPost’s 4.25 per cent was trading higher at $101.5/102.5. Olam which has a coupon of 7 per cent was struggling to stay above water at $100.2/100.8.
All the three perps, which were sold within the past 10 days, were priced at $100 plus a typical commission of 0.25 per cent, so the effective cost would be $100.25.
‘One customer complained that Genting is so huge compared to SingPost, so how come Genting is not performing compared to SingPost,’ said a broker.
Genting issued $1.8 billion perps after receiving $6 billion orders. SingPost had orders of $2.5 billion or seven times more than the $350 million issuance.
‘SingPost is exceptional, like it’s small size and it’s got everything,’ the broker added. SingPost is 26.01 per cent owned by Temasek Holdings (Private) Ltd.
Olam’s issuance was $275 million after the order book came to $350 million. One relationship manager said he took orders only from customers who asked for Olam rather than actively market the issue, given its higher risk profile.
Among the three names, SingPost is considered the least risky with an A+ credit rating, said Todd Schubert, Bank of Singapore head of credit research.
Genting has a Baa3/BBB- credit rating while Olam has no credit rating.
‘Given that the entire SGD corporate bond market is less than US$100 billion, Genting represented a significant increment to the current outstanding stock of SGD dollar bond,’ said Mr Schubert. ‘The large size of Genting vis-a-vis Olam and SingPost and relative to the size of the market limits Genting’s uniqueness factor,’ he said.
Said Hartmut Issel, head of UBS Wealth Management Research Singapore: ‘We had very low issuance activity in the second half of last year, accompanied by high accumulation of cash during that time. The real attraction in these perpetual securities lies in the lucrative yield they provide.’
Added Wilson Aw, head of UOB Private Banking: ‘Being Singapore dollar denominated, besides appealing to local investors, they also offer an avenue for non-Singapore investors.
‘However, investors should bear in mind, for instance, the subordination of the structure and the higher interest rate risk compared to straight bonds.’
SingTel – BT
SingTel’s US$700m, 5.5-year notes over 4 times subscribed
Three traded perpetual securities see varied performances
SINGTEL’s sale of US$700 million, 5.5-year notes yesterday met with strong demand as the debt market continued to sizzle. The order book for the bonds, which pay a coupon of 2.375 per cent, came to about US$3.25 billion and was more than four times subscribed by investors, said SingTel in a statement.
But those looking for a quick buck trading some of the highly popular perpetual securities are finding that not all perps are the same.
Genting’s 5.125 per cent was selling at $100.65 but SingPost’s 4.25 per cent was trading higher at $101.5/102.5. Olam which has a coupon of 7 per cent was struggling to stay above water at $100.2/100.8.
All the three perps, which were sold within the past 10 days, were priced at $100 plus a typical commission of 0.25 per cent, so the effective cost would be $100.25.
‘One customer complained that Genting is so huge compared to SingPost, so how come Genting is not performing compared to SingPost,’ said a broker.
Genting issued $1.8 billion perps after receiving $6 billion orders. SingPost had orders of $2.5 billion or seven times more than the $350 million issuance.
‘SingPost is exceptional, like it’s small size and it’s got everything,’ the broker added. SingPost is 26.01 per cent owned by Temasek Holdings (Private) Ltd.
Olam’s issuance was $275 million after the order book came to $350 million. One relationship manager said he took orders only from customers who asked for Olam rather than actively market the issue, given its higher risk profile.
Among the three names, SingPost is considered the least risky with an A+ credit rating, said Todd Schubert, Bank of Singapore head of credit research.
Genting has a Baa3/BBB- credit rating while Olam has no credit rating.
‘Given that the entire SGD corporate bond market is less than US$100 billion, Genting represented a significant increment to the current outstanding stock of SGD dollar bond,’ said Mr Schubert. ‘The large size of Genting vis-a-vis Olam and SingPost and relative to the size of the market limits Genting’s uniqueness factor,’ he said.
Said Hartmut Issel, head of UBS Wealth Management Research Singapore: ‘We had very low issuance activity in the second half of last year, accompanied by high accumulation of cash during that time. The real attraction in these perpetual securities lies in the lucrative yield they provide.’
Added Wilson Aw, head of UOB Private Banking: ‘Being Singapore dollar denominated, besides appealing to local investors, they also offer an avenue for non-Singapore investors.
‘However, investors should bear in mind, for instance, the subordination of the structure and the higher interest rate risk compared to straight bonds.’
TELCOs – OCBC
4QCY11 REVIEW – OVERWEIGHT
•Mobile business still resilient
•Stable 2012 outlook
•Defensive earnings, attractive yields
Decent 4CY11 showing from M1, StarHub
Both M1 and StarHub both met our forecasts at the recent 4QCY11 results, although SingTel slightly disappointed due to its volatile Associates contribution. StarHub declared a quarterly dividend of S$0.05/share, while M1 declared a final dividend of S$0.079/share.
Review of Singapore mobile operations
SingTel continues to dominate with a ~47% post-paid market share, followed by StarHub with ~28% and M1 ~26%. Overall, the post-paid subscriber base grew by 62k QoQ to 4029k, with the bulk coming from SingTel (+44k). And due to limited availability of iPhone 4S handsets, we note that all the three telcos saw increased monthly churn, with M1 having highest (1.4%). Both SingTel and StarHub recorded modest improvements in monthly ARPUs while M1 saw a slight decline. Meanwhile, comments from all the three telcos suggest that a revamp of the generous data package currently for smartphones is likely when they launch LTE later this year.
Stable 2012 outlook
Going forward, all the three telcos expect their Singapore operations to remain stable or show modest growth, buoyed by continued customer additions and increasing mobile data usage. But with more smartphone users likely to use data-based means to communicate, we expect EBITDA margins to remain flat or even trend slightly lower. Nevertheless, the telcos have kept their dividend payout guidance, thus keeping their yields attractive.
Maintain OVERWEIGHT
The telco shares have underperformed the broader market YTD, whereas the STI has surged some 12.6%. But with markets likely to remain volatile, we believe that the telcos’ defensive earnings and attractive yields offer a safe harbour for the less risk-adverse investors. Maintain OVERWEIGHT.
TELCOs – OCBC
4QCY11 REVIEW – OVERWEIGHT
•Mobile business still resilient
•Stable 2012 outlook
•Defensive earnings, attractive yields
Decent 4CY11 showing from M1, StarHub
Both M1 and StarHub both met our forecasts at the recent 4QCY11 results, although SingTel slightly disappointed due to its volatile Associates contribution. StarHub declared a quarterly dividend of S$0.05/share, while M1 declared a final dividend of S$0.079/share.
Review of Singapore mobile operations
SingTel continues to dominate with a ~47% post-paid market share, followed by StarHub with ~28% and M1 ~26%. Overall, the post-paid subscriber base grew by 62k QoQ to 4029k, with the bulk coming from SingTel (+44k). And due to limited availability of iPhone 4S handsets, we note that all the three telcos saw increased monthly churn, with M1 having highest (1.4%). Both SingTel and StarHub recorded modest improvements in monthly ARPUs while M1 saw a slight decline. Meanwhile, comments from all the three telcos suggest that a revamp of the generous data package currently for smartphones is likely when they launch LTE later this year.
Stable 2012 outlook
Going forward, all the three telcos expect their Singapore operations to remain stable or show modest growth, buoyed by continued customer additions and increasing mobile data usage. But with more smartphone users likely to use data-based means to communicate, we expect EBITDA margins to remain flat or even trend slightly lower. Nevertheless, the telcos have kept their dividend payout guidance, thus keeping their yields attractive.
Maintain OVERWEIGHT
The telco shares have underperformed the broader market YTD, whereas the STI has surged some 12.6%. But with markets likely to remain volatile, we believe that the telcos’ defensive earnings and attractive yields offer a safe harbour for the less risk-adverse investors. Maintain OVERWEIGHT.