July 2010
Results Announcement
- 12 Jul 10 : SPH (Q311) – EPS 10ct (todate 26ct)
- 15 Jul 10 : M1 (Q210) – EPS 4.5ct (todate 9.9ct) ; Div 6.3ct
- 28 Jul 10 : SingPost (Q110) – EPS 2.111ct ; Div 1.25ct
- 29 Jul 10 : SATS (Q111) – EPS 4.0ct
- 30 Jul 10 : SMRT (Q111) – EPS 2.5ct
- 3 Aug 10 : STEng (Q210)
- 5 Aug 10 : StarHub (Q210)
- 12 Aug 10 (AM) : MIIF (1H10)
- 13 Aug 10 : ComfortDelgro (Q210)
STI = 2987.70 (-9.95)
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SPH |
FY09 (Aug) |
26 |
25 |
$4.13 |
6.053% |
15.88 |
Interim 7ct ; Final 9ct + 9ct (Special) |
|
SingPost |
FY10 (Mar) |
8.563 |
6.25 |
$1.14 |
5.482% |
13.31 |
Q1, Q2, Q3 1.25ct ; Q4 2.5ct |
|
STI ETF |
Dec-09 |
— |
3 |
$3.03 |
1.980% |
— |
Dec09 3ct ; Jun09 4ct |
|
SATSvcs |
FY10 (Mar) |
16.7 |
13 |
$2.92 |
4.452% |
17.49 |
Final 8ct ; Interim 5ct |
|
ST Engg |
FY09 (Dec) |
14.78 |
13.3 |
$3.24 |
4.099% |
21.92 |
Final 4ct + 6.28ct (Special) ; Interim 3ct |
Transport
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SBSTransit |
FY09 (Dec) |
17.75 |
8.8 |
$1.83 |
4.809% |
10.31 |
Interim 4.5ct ; Final 4.3ct |
|
ComfortDelGro |
FY09 (Dec) |
10.52 |
5.3 |
$1.60 |
3.313% |
15.21 |
Interim 2.63ct ; Final 2.67ct |
|
SMRT |
FY10 (Mar) |
10.7 |
8.5 |
$2.22 |
3.829% |
20.75 |
Interim 1.75ct ; Final 6.75ct |
TELCO
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SingTel |
FY10 (Mar) |
24.55 |
14.2 |
$3.12 |
4.551% |
12.71 |
Interim 6.2ct ; Final 8ct |
|
M1 |
FY09 (Dec) |
16.8 |
13.4 |
$2.12 |
6.321% |
12.62 |
Interim 6.2ct ; Final 7.2ct |
|
StarHub |
FY09 (Dec) |
18.68 |
19 |
$2.36 |
8.051% |
12.63 |
Q1 4.5ct ; Q2 4.5ct ; Q3 5ct ; Q4 5ct |
Funds / Infrastructure
|
Stock |
Period |
DPS cts |
Mkt |
Yield |
NAV |
Div Breakdown |
|
SPAus |
2H10 (Mar-10) |
A4.0 (Gross) |
$0.985 |
9.938% |
A$0.94 |
2H10 A4.0ct ; 1H10 A4.0ct |
|
MIIF |
2H – Dec09 |
1.50 |
$0.515 |
5.825% |
$0.82 |
2H09 1.5ct ; 1H09 1.5ct |
* SPAus DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.2236) fm Yahoo
NOTES :
- Mkt Price is as on 30-Jul-10
- SingPost : Q111 (Jun10) – 1.25ct
- M1 : 1H10 (Jun) – Interim 6.3ct
- SingTel : 2H10 (Mar10) – Final 8ct ; 1H10 (Sep09) – Interim 6.2ct
- SPAus : 2H10 (Mar10) – A4ct (before tax) / A3.7739ct (after tax) ; 1H10 (Sep09) – A4ct (before tax) / A3.8113ct (after tax)
- StarHub : Q110 (Mar) – 5ct
- SATSvcs : Q410 (Mar10) – Final 8ct ; Q210 (Sep09) – Interim 5ct
- SMRT : Q410 (Mar10) – Final 6.75ct ; Q210 (Sep09) – Interim 1.75ct
- SPH : 1H10 (Feb) – 7ct
- MIIF : 2H09 (Dec) – 1.5ct ; 1H09 (Jun) – 1.5ct
- ST Engg : Q409 (Dec) – 4ct (Final) + 6.28ct (Special) ; Q209 (Jun) – 3ct
- SBSTransit : Q409 (Dec) – 4.3ct ; Q209 (Jun) – 4.5ct
- ComfortDelgro : Q409 (Dec) – 2.67ct ; Q209 (Jun) – 2.63ct
- StarHub : FY10 Div Policy 20ct ie. 5ct/Q
TELCOs – BNP
•
iPhone 4 to be sold by all three operators this Friday.
•
Subsidy levels are likely to be the same as on the 3GS.
•
Negative impact on telco’s earnings may be more spread out this time.
•
Maintain Neutral on Singapore telcos. Top pick: StarHub.
Everyone wants a bite
iPhone 4 arrives on Singapore shores this Friday!
SingTel, StarHub and M1 have all announced that they will start selling the iPhone 4 this Friday (30 July). Apple (AAPL US, Not rated) also plans to sell the iPhone 4 on a non-contract basis directly through its stores for SGD888-1,048 (16-32Gb). Based on registered interests, all three telcos are expecting demand to be fairly strong on launch day.
iPhone 4 price will be cheaper than 3GS
The data plans announced for the iPhone 4 are identical to those for 3GS, in terms of monthly subscription fees and call/sms/data allocations. However, all operators are pricing the iPhone 4 at SGD38 cheaper than the 3GS. In comparison, in the US, AT&T (T US, Not rated) launched the iPhone 4 at the same price that it initially sold the 3GS (ie USD299 for 32Gb).
Subsidies likely the same but impact will be more spread out
The subsidies on the iPhone 4 are likely to be the same as on the 3GS, with any reduction in handset cost being passed on to subscribers. We maintain that the impact will be negative for telcos for existing subscribers that upgrade to an iPhone (with a data plan). Over a two-year contract, data plan revenues are unlikely to cover the additional subsidies on the iPhone 4. Nevertheless, the negative impact on telcos margins this time around could be more spread out over the next 12 months as a significant number of users (possibly, 150,000-200,000) are likely to have entered into two-year contracts for the 3GS in the last
eight months. There could also be limited volumes of iPhone 4 available-for-sale initially.
Maintain Neutral on the sector; Top pick: StarHub
We maintain NEUTRAL on the Singapore Telco sector. In our view, competitive pressure will remain high in the coming months with: 1) the National Broadband Network due to be launched in 3Q10, and 2) the jostle for Pay-TV market share with the migration of the BPL to SingTel’s MioTV. While there is strong demand for data, much of the benefits are currently accruing to handset vendors due to their strong bargaining power. Our top BUY is StarHub, which we believe offers an attractive and sustainable prospective yield of 8.7%. Sentiment on the stock is also likely to improve given the cross-carriage mandate and potentially less-than feared Pay-TV churn rates in the next two months. We maintain HOLD on SingTel.
TELCOs – BNP
•
iPhone 4 to be sold by all three operators this Friday.
•
Subsidy levels are likely to be the same as on the 3GS.
•
Negative impact on telco’s earnings may be more spread out this time.
•
Maintain Neutral on Singapore telcos. Top pick: StarHub.
Everyone wants a bite
iPhone 4 arrives on Singapore shores this Friday!
SingTel, StarHub and M1 have all announced that they will start selling the iPhone 4 this Friday (30 July). Apple (AAPL US, Not rated) also plans to sell the iPhone 4 on a non-contract basis directly through its stores for SGD888-1,048 (16-32Gb). Based on registered interests, all three telcos are expecting demand to be fairly strong on launch day.
iPhone 4 price will be cheaper than 3GS
The data plans announced for the iPhone 4 are identical to those for 3GS, in terms of monthly subscription fees and call/sms/data allocations. However, all operators are pricing the iPhone 4 at SGD38 cheaper than the 3GS. In comparison, in the US, AT&T (T US, Not rated) launched the iPhone 4 at the same price that it initially sold the 3GS (ie USD299 for 32Gb).
Subsidies likely the same but impact will be more spread out
The subsidies on the iPhone 4 are likely to be the same as on the 3GS, with any reduction in handset cost being passed on to subscribers. We maintain that the impact will be negative for telcos for existing subscribers that upgrade to an iPhone (with a data plan). Over a two-year contract, data plan revenues are unlikely to cover the additional subsidies on the iPhone 4. Nevertheless, the negative impact on telcos margins this time around could be more spread out over the next 12 months as a significant number of users (possibly, 150,000-200,000) are likely to have entered into two-year contracts for the 3GS in the last
eight months. There could also be limited volumes of iPhone 4 available-for-sale initially.
Maintain Neutral on the sector; Top pick: StarHub
We maintain NEUTRAL on the Singapore Telco sector. In our view, competitive pressure will remain high in the coming months with: 1) the National Broadband Network due to be launched in 3Q10, and 2) the jostle for Pay-TV market share with the migration of the BPL to SingTel’s MioTV. While there is strong demand for data, much of the benefits are currently accruing to handset vendors due to their strong bargaining power. Our top BUY is StarHub, which we believe offers an attractive and sustainable prospective yield of 8.7%. Sentiment on the stock is also likely to improve given the cross-carriage mandate and potentially less-than feared Pay-TV churn rates in the next two months. We maintain HOLD on SingTel.
SingPost – JPM
1Q FY11 results review
• 1Q FY11 results in line: Revenue of S$138MM was up 13.5% Y/Y largely on the back of 11.4% increase in mail revenue and 34.4% increase in logistics revenue (1Q10 Quantium Solutions contributed only 2 months of revenue). Net profit of S$40.7MM (+3.3% Y/Y) was in line with our expectations. An interim DPS of 1.25 cents was declared per previous years.
• Strong bulk mail volume growth: For 1Q11, volumes in bulk mail grew 10.9% where direct mail rose 20.2% and business mail rose 3.5%. Public mail volumes, however, saw a slight decline of 0.2%, evident of gradual esubstitution. Overall mail volume was higher by 9.1%, resulting in a 9% improvement in domestic mail revenue. Despite the strong volume growth, mail operating margin was only slightly higher at 37.8% (1Q10: 37.2%) due to higher operating expenses and potentially due to the onset of higher terminal dues for international mail. However, management highlighted that the impact of higher terminal dues on underlying profit has been less than the 5% as previously guided, as it engages in mitigating measures such as entering into bilateral arrangements to send out international mails via overseas postal operators which are not subject to the higher terminal dues.
• Operating cashflow weaker on higher working capital: Operating cashflow dipped from S$68MM to S$29MM on increased working capital requirements. However, management guided that these are due to timing differences and expects free cash flow for FY11 to be similar to FY10.
• Invested in equity-linked notes: SingPost invested S$38MM of its cash in equity-linked notes (ELN) relating to dividend-yielding Singapore blue chip companies with effective yield of 3-5%, with the intention to partially offset the higher interest costs from its S$200MM, 3.5% fixed rate notes (FRN) issued on 30 March 2010. The ELN are not capital protected. If management does not find suitable M&A targets, it may invest a greater portion of the FRN proceeds into other high-yield financial instruments in the interim. It is necessary that management deploys the cash it raised constructively soon, in our view, otherwise this may result in a decrease in its ROCE and a potential de-rating of the stock.
SingPost – OCBC
Cautiously optimistic on its outlook
1QFY11 results in line with expectations. Singapore Post (SingPost) reported a 13.5% YoY rise in revenue to S$138.2m and a 3.2% increase in net profit to S$40.7m in 1QFY11, just 1% shy of our estimates. Annualised results were also in line with the street’s estimates. Revenue growth was due to higher contributions in the mail (+11.4%) and logistics (34.4%) segments. The latter segment was boosted by the consolidation of Quantium Solutions for the full quarter compared to two months in 1QFY10. Recall that the acquisition was completed on 6 May 09. Rental and property income rose slightly by 1.6% YoY to S$10.1m. Excluding one-off items such as benefits from the Jobs Credit Scheme and amortisation of deferred gain on IP rights, underlying net profit rose 1% to S$37.3m.
Funds ready to be deployed. SingPost took advantage of the low interest environment in March to issue S$200m worth of fixed rate notes. We understand that the group has invested about S$38m in higher yielding financial instruments comprising mainly equity-linked notes (ELNs) and other bonds. The ELNs are related to dividend-yielding Singapore blue-chip companies and management explained that this is a temporary measure to generate better returns from idle funds before the group uses them in M&A activities.
Cautiously optimistic. The group is seeing an increase in business activities with an improving economy, but remains “cautiously optimistic” as it continues to face challenges in its industry, such as e-substitution and competition. As such, management reiterated its aim to grow its non-mail contributions and regional business for diversification and growth. More specifically, SingPost will push for regional growth through Quantium Solutions, especially in e-commerce logistics. Meanwhile, the group is also expanding in-country distribution networks in the region, especially in India.
Maintain HOLD. It has been about half a year since the group’s CEO left, and the search for a new CEO is still ongoing. We continue to like SingPost’s stable and resilient business but transformational growth is unlikely to happen overnight, given that the group aims to leverage on its core competencies, and the fact that the top position is still vacant. As expected, an interim quarterly dividend of S$0.0125/share has been declared. Given limited upside potential to our DCF-based fair value estimate of S$1.16, we maintain our HOLD rating on SingPost.