SingTel – OCBC
Adds 45k Pay TV subscribers
Adds 45k Pay TV subs. SingTel has added another 45k Pay TV subscribers over the last four months, growing its mio TV base from 155k to 200k, an increase of 29%. As a recap, SingTel now holds the exclusive broadcast rights for the widelyfollowed Barclays Premier League (BPL) 2010-2012 seasons; SingTel has scored another coup over StarHub by securing the exclusive broadcast rights to a suite of sports networks and services from ESPN STAR Sports (ESS) from mid-2010. As the deals were secured before the recent Pay TV revamp in Mar, these will only be transmitted via SingTel’s mio TV setup.
Little impact on FY10 numbers. Despite the sharp jump in new Pay TV adds, we do not expect them to have any impact on FY10 numbers. We believe that the bulk of its new subscribers may be paying nothing until the actual broadcast of the BPL in Aug 2010; the ongoing promotion for its mio TV also offers the free broadcast of the 2010 Champions League and Europa League matches. For home subscribers, SingTel is charging a monthly subscription of S$23 (before GST) for BPL and for S$2 more, they can get additional ESS channels. We understand that commercial subscribers will need to pay around S$598 (before GST) per month. As such, we are likely to see the full impact of its increased Pay TV subscriber base in its 3QFY11 results (ending Dec 2010).
4QFY10 results likely to be upbeat. Having said that, we still expect its 4QFY10 results – likely due out by mid-May – to be fairly upbeat as per its guidance for FY10; SingTel had earlier guided for its Singapore operational EBITDA to grow at low single-digit level and for its Australia operating revenue and EBITDA to grow at low single-digit levels; SingTel expects both Bharti and Telkomsel (its two largest contributors) earnings to grow in local terms, although it notes that ordinary dividend will be lower. For 4QFY10, we expect net profit to come in around S$673.2m on revenue of around S$3391.3m; for FY10, we estimate that SingTel will post revenue of S$15791.6m and net profit of S$3565.3m.
Maintain BUY. With its FY10 results due soon, we hold off revising our FY11 estimates; but we remain upbeat about its prospects on the back of a likely faster-than-expected recovery in its associate earnings and opportunities presented by the NBN. As such, we maintain our BUY rating and S$3.51 fair value.
SingTel – BT
SingTel’s pay-TV subscriber base hits 200,000
SINGAPORE Telecom has scored another 45,000 pay-television customers in the past four months as the lure of premiership football continues to draw viewers to its camp.
SingTel said yesterday that its mio TV subscriber base has grown to 200,000 – 29 per cent up from 155,000 customers at the end of last year.
This is the fastest pace of growth since SingTel introduced its Internet-based mio TV service in July 2007. It also suggests that SingTel’s bold bid for Barclays Premier League (BPL) broadcast rights could be game-changing in the pay-TV stakes.
Despite SingTel’s recent gain, rival StarHub still has a comfortable lead with more than 500,000 cable TV subscribers.
SingTel outbid StarHub to score the exclusive right to broadcast the 2010 to 2013 seasons of the BPL. The win sparked a public outcry over having to pay for two pay-TV subscriptions as well as the hassle of having two incompatible set top boxes.
SingTel’s generous BPL bid also reportedly raised Fifa’s price expectations for the upcoming World Cup broadcast rights and contributed to the current impasse.
SingTel and StarHub are still trying to score an injury-time goal to screen the coveted tournament here.
SingTel – UOBKH
Big But Valuation Unattractive
Singapore – Dominance in corporate data eroded. SingTel dominance in corporate data services, which accounted for 25.6% of revenue from Singapore operations, will be challenged due to open access provided by Next Gen Nationwide Broadband Network (NGNBN). NGNBN provides superior performance with speed of up to 1Gbps. We believe corporate customers will be enticed by NGNBN-based services, which are likely to be more competitively priced as wholesale prices from NGNBN are fixed and transparent. The government, for example, has already decided to utilise NGNBN for a substantial portion of its requirement for telecoms services.
Australia – Optus could benefit from structural changes. The Rudd administration plans to set up a National Broadband Network (NBN) providing broadband speed of up to 100Mbps for 90% of Australians and structurally separate Telstra's wholesale network and consumer businesses. However, the government needs Telstra's cooperation and passive infrastructure to reduce the hefty cost of rolling out NBN. There is uncertainty over whether Telstra could solicit concessions from the government by cooperating on NBN. Legislative processes to reform regulations could also be protracted.
Regional mobile associates – facing headwinds. Bharti Airtel faces intense competition in India, which is expected to persist due to more new entrants, such as Telenor's Unicor and Etisalat's STEL. The impending acquisition of Zain Africa is also expensive at EV/EBITDA of 9.2x and is funded by huge additional borrowings of US$8.3b. Telkomsel faces slower growth in Indonesia while competitors Indosat and XL Axiata have been revitalised after change of controlling shareholders and revamp of management teams.
Downgrade to HOLD. We cut our earnings forecast for FY11 and FY12 by 1.9% and 3.9% respectively due to fluctuations in exchange rates and lower contributions from Bharti Airtel. We value SingTel at S$3.06 based on sum-of-the-parts, thus providing limited upside. We estimate SingTel's FY11 free cash flow yield at 6.6%, lower than 11.1% for M1 and 9.3% for StarHub. Our preferred picks for the sector are M1 and StarHub. Downgrade from BUY to HOLD. Entry price is S$2.55.
SMRT – Lim and Tan
Small Impact
• The end of transfer penalties and the resultant decline in overall train / bus fares will lead to about $16 mln loss in revenue on an annualized basis for both SMRT (as well as for Comfort Delgro‘s SBS Transit).
• But somehow, as in the past, such “setback” (like the costs associated with the Circle Line) will probably not affect SMRT’s bottom-line much.
• Fact remains SMRT is at a new all-time high (obviously also benefiting from the surge in COE premiums for instance), while Comfort Delgro is 35% off its high.
• One can only hope SMRT stays Singapore-centric.
• We are holding on to our BUY call.
• SMRT will release its result for ye Mar ’10 on Friday Apr 30th. An unchanged 6 cents final dividend is a forgone conclusion. (Together with the 1.75 cents interm, yield at $2.19 is 3.5%.)
Transport – CIMB
2.5% overall fare reduction from July
New fare structure
Maintain Neutral on sector. The Public Transport Council (PTC) has announced that train and bus fares will be reduced by 2.5% using the fare formula for 2010 and the implementation of distance-based fares. Although transport operators will book lower revenue, commuters will have the flexibility to decide on routes without incurring extra charges. Furthermore, given the rising costs of private car ownership, we believe public transportation ridership will continue to climb yoy, boosted by higher tourist arrivals and a growing population. We maintain Outperform on SMRT with an unchanged DCF-based target price of S$2.41 (WACC 9%). We also maintain Underperform on CD with an unchanged target price of S$1.73, DCF-derived (WACC 10.4%) but with a 10% discount applied to account for its forex risks. Between the two operators, we continue to prefer SMRT for its bigger train operations (including new Circle Line), making it potentially a bigger beneficiary of higher train ridership. Furthermore, more than 20% of SMRT’s operating profit comes from rental revenue, which is likely to jump following additional space coming from new Circle Line stations.
The news
Yesterday, the PTC announced a full reduction of 2.5% for train and bus fares based on the fare formula for 2010 and the implementation of distance-based fares. With the reduction from 3 Jul 10, commuters will only be charged according to the distance travelled regardless of the number of transfers made. Based on the current pattern of public-transport journeys, the PTC said two in three commuters will benefit from the reduction or actually encounter no change in their weekly public-transport expenditure. Some 63% of commuters will save an average of S$25 a year. The remainder will pay S$16 more on average a year.
Comments
Making public transportation more flexible for commuters. This new fare structure does not come as a surprise as it had been outlined in the Land Transport Master Plan. Transfer penalties, which have been reduced gradually over the last two years (15 cts in 2008 and 10 cts in 2009), will be completely gone from 3 Jul. Distancebased fares will afford commuters full flexibility to decide on their preferred route of travel without incurring any fare penalty, if they choose to make transfers.
Positive impact on ridership. Given that the costs of private car ownership have shot up this year, we expect public-transport ridership to climb further yoy. Furthermore, ridership should be boosted by a growing population and higher tourist arrivals.
Train ridership continues to beat expectations. We believe that the fare-reduction impact for transport operations will be offset by higher train ridership, which has surpassed our expectations YTD. SMRT’s March ridership was up 9.1% yoy while ComfortDelgro’s February ridership was up 11.8% yoy.