SingTel – BT
Bharti outlook better as price war recedes
(NEW DELHI) The focus for Bharti Airtel will be to maintain profit margins as a vicious price war recedes, after India’s top telecoms firm reported that quarterly profits fell by a third.
Facing tough competition in a crowded home market, Bharti, an associate of Singapore Telecommunications, is betting on opportunities in Africa, where the mobile penetration level at 32 per cent is less than India’s 54 per cent and there are fewer competitors.
Bharti’s results included its new African operations, which were on its balance sheet for only 23 days in the quarter ended June. Bharti acquired the business from Kuwaiti telecoms group Zain for US$9 billion in June and became the world’s fifth-biggest mobile operator.
After call prices in India tumbled to as low as 0.4 US cents a minute – with most of the price declines taking place in the second half of 2009 – there were no big price cuts in April-June.
Bharti’s earnings before interest, taxes, depreciation and amortisation margin was 36.9 per cent in April-June, compared with 41.3 per cent a year ago.
Bharti said that net profit fell to 16.82 billion rupees (S$490 million) under international accounting standards for its first quarter ended June, from 24.75 billion rupees a year ago.
Derivatives and exchange fluctuations led to a loss of 2.16 billion rupees as the US dollar strengthened. Bharti had a forex gain of 2.79 billion rupees a year ago. Total revenue rose to 122.31 billion rupees from 104.14 billion rupees. — Reuters
SingTel – BT
Bharti outlook better as price war recedes
(NEW DELHI) The focus for Bharti Airtel will be to maintain profit margins as a vicious price war recedes, after India’s top telecoms firm reported that quarterly profits fell by a third.
Facing tough competition in a crowded home market, Bharti, an associate of Singapore Telecommunications, is betting on opportunities in Africa, where the mobile penetration level at 32 per cent is less than India’s 54 per cent and there are fewer competitors.
Bharti’s results included its new African operations, which were on its balance sheet for only 23 days in the quarter ended June. Bharti acquired the business from Kuwaiti telecoms group Zain for US$9 billion in June and became the world’s fifth-biggest mobile operator.
After call prices in India tumbled to as low as 0.4 US cents a minute – with most of the price declines taking place in the second half of 2009 – there were no big price cuts in April-June.
Bharti’s earnings before interest, taxes, depreciation and amortisation margin was 36.9 per cent in April-June, compared with 41.3 per cent a year ago.
Bharti said that net profit fell to 16.82 billion rupees (S$490 million) under international accounting standards for its first quarter ended June, from 24.75 billion rupees a year ago.
Derivatives and exchange fluctuations led to a loss of 2.16 billion rupees as the US dollar strengthened. Bharti had a forex gain of 2.79 billion rupees a year ago. Total revenue rose to 122.31 billion rupees from 104.14 billion rupees. — Reuters
SMRT – Lim and Tan
Unfortunate Punching Bag
• The Edge‘s timely “defense” of Saw Phaik Hwa (SMRT’s CEO) in its latest issue noted the following:
– The fare-setting Public Transport Council (PTC) has no representation from either SMRT or Comfort Delgro, which owns 75.25% of SBS Transit. Members come from the LTA, academia, labor unions, grassroots organizations, professional bodies and businesses.
– Fare hikes / adjustments are determined by a formula that takes into account inflation, national average earnings, less productivity gains.
– Operators may apply for fare hikes / adjustments once a year. (Between 2000 and 2007, there were 5 fare increases of a few cents each time. In 2008, a nominal 0.7% increase was granted, less than the 3% cap provided for; and in 2009, fares were actually reduced by 4.6% as the operators passed on savings from the 2009 Budget.)
– The recently implemented distance-fare scheme was an initiative of the LTA.
– The rail infrastructure was built and designed by the Land Transport Authority. The number of carriages, ie capacity of trains, would have been designed by LTA.
– The Downtown Line, due for completion from 2015, is “still” up for grabs. (*Yet, ask 100 train commuters, and 99 are likely to think SMRT is the sole operator of all MRT lines; North South, East West, North East and Circle Lines.)
– SMRT shares have returned 18.3% per annum since 2000.
• We have long maintained that the perennial question the authorities have to deal with is, is public transport a public service (offering subsidies is then entirely the government’s prerogative; fare hike may not be granted even if provided for by the formula) and then act accordingly: privatize SMRT and SBS Transit.
• The Edge noted that there are currently 10 “Hold” and 8 “Sell” recommendations by broking houses, with no one calling a “BUY”.
• We have however been calling a BUY, and are happy to keep it that way. Assuming 8.75 cents per share dividend for ye Mar’11, yield is a reasonably attractive 4.3%.
*All, except for North Ease Line operated by SMRT.
SMRT – Lim and Tan
Unfortunate Punching Bag
• The Edge‘s timely “defense” of Saw Phaik Hwa (SMRT’s CEO) in its latest issue noted the following:
– The fare-setting Public Transport Council (PTC) has no representation from either SMRT or Comfort Delgro, which owns 75.25% of SBS Transit. Members come from the LTA, academia, labor unions, grassroots organizations, professional bodies and businesses.
– Fare hikes / adjustments are determined by a formula that takes into account inflation, national average earnings, less productivity gains.
– Operators may apply for fare hikes / adjustments once a year. (Between 2000 and 2007, there were 5 fare increases of a few cents each time. In 2008, a nominal 0.7% increase was granted, less than the 3% cap provided for; and in 2009, fares were actually reduced by 4.6% as the operators passed on savings from the 2009 Budget.)
– The recently implemented distance-fare scheme was an initiative of the LTA.
– The rail infrastructure was built and designed by the Land Transport Authority. The number of carriages, ie capacity of trains, would have been designed by LTA.
– The Downtown Line, due for completion from 2015, is “still” up for grabs. (*Yet, ask 100 train commuters, and 99 are likely to think SMRT is the sole operator of all MRT lines; North South, East West, North East and Circle Lines.)
– SMRT shares have returned 18.3% per annum since 2000.
• We have long maintained that the perennial question the authorities have to deal with is, is public transport a public service (offering subsidies is then entirely the government’s prerogative; fare hike may not be granted even if provided for by the formula) and then act accordingly: privatize SMRT and SBS Transit.
• The Edge noted that there are currently 10 “Hold” and 8 “Sell” recommendations by broking houses, with no one calling a “BUY”.
• We have however been calling a BUY, and are happy to keep it that way. Assuming 8.75 cents per share dividend for ye Mar’11, yield is a reasonably attractive 4.3%.
*All, except for North Ease Line operated by SMRT.
SingTel – GS
1Q11 Result Preview
Result Date:
• Thursday, 12 August 2010, approximately 9:30am (AEST).
GS&PA Estimates:
• N/a.
Trading Comment:
• SingTel’s key Associates will have reported their June quarter results by the time SingTel reports its 1Q11. Thus, the focus will be on the performance of SingTel’s Singapore and Australian businesses.
Look Out For:
• Singapore: At the FY10 result, SingTel gave subdued guidance for Singapore, with FY11 revenues expected to grow mid-single-digit and EBITDA expected to decline low-to-mid-single-digit. This is despite robust economic conditions (1Q10 GDP +25.1%, 4Q09 +11.0%, 3Q09 -4.6%, 2Q09 -12.4%, 1Q09 -15.5%). We expect to see: (1) robust WBB growth offset by slower mobile net adds; (2) a continued slowdown in fixed line; and (3) rising costs for SingTel’s new initiatives (e.g. mio TV). We may also get clarity on how SingTel expects its financials to look (margins, capex, etc.) in an NBN world.
• Australia: At the FY10 result, SingTel guided to mid-single-digit growth in sales and EBITDA in FY11. We expect to see broadly similar sales trends to previous results in 1Q11 – Mobile strong, Business and Wholesale flattish, Consumer and SME down. Our focus will be Optus Mobile (c. 70% of Optus EBITDA), specifically: (1) whether Optus Mobile has maintained its double-digit revenue growth momentum; (2) whether Telstra’s renewed vigour has had an impact on net adds; and (3) whether Optus Mobile has managed to drive earnings growth and margins.
• Associates: Following a robust recovery in FY10 (associates contribution +19.2% in FY10 cf. FY09 -21.6%) we expect growth in SingTel’s Associates earnings to slow in FY11. To date, both Telkomsel (NPAT -14.5%) and Globe (NPAT -27.5%) have reported weaker June quarter results. We also expect Bharti’s profit results (reports 11 Aug) to remain challenged given: (1) the impact of the price war; and (2) costs associated with the Zain acquisition.
Weakness in the underlying results is likely to be offset to some extent by the stronger Indonesian Rupiah.