TELCOs – CIMB
4Q09 results round-up
• No surprises in 4Q09; maintain UNDERWEIGHT. 4Q09 results of all three Singapore telcos were fairly in line, with typical seasonality. Highlights were: 1) rather poor service revenue growth although mobile revenue continued to improve; 2) weaker margins; and 3) continued ARPU and revenue pressure in fixed broadband and corporate data. We retain our UNDERWEIGHT position on the sector as we remain apprehensive about rising content costs, pressure on broadband ARPUs and escalating subsidies. While we leave our DCF-based target price of S$2.07 (WACC: 9.5%) intact, we downgrade M1 from Outperform to NEUTRAL as it has outpaced the market by 9% since our upgrade and our house continues to prefer higher-beta and cyclical stocks. Nevertheless, M1 remains our top Singapore telco pick for its capital-management potential and greatest upside to NGNBN. Avoid StarHub (UNDERPERFORM, TP: S$2.14) and SingTel (UNDERPERFORM, TP: S$3.30).
• Weak service revenue… Service revenue growth decelerated to +1.3% yoy in 4Q09, the second lowest ever, due partly to competition despite a recovering economy. M1’s mobile revenue was weak from lower voice usage and roaming in postpaid and IDD revenue. StarHub’s fixed broadband and corporate data revenue came under pressure from competition while SingTel’s IDD revenue was lower from lower rates. Mobile revenue grew 5% yoy in 4Q09, driven by growth at SingTel and StarHub from their larger customer bases.
• …and margins. EBITDA margins slipped from seasonality and iPhone-induced SACs. With M1 and StarHub launching iPhones, industry EBITDA margins fell 2.6% pts qoq to 33.5%, the lowest since we began keeping records in 1Q04. Fixed broadband and corporate data revenue remained weak as competition remained rather heavy in those business verticals.
• Uninspiring outlook. M1 and StarHub gave fairly lacklustre 2010 guidance but we believe M1 is low-balling expectations. We believe Singapore telcos will benefit from the recovering economy and rising tourist arrivals with the opening of two integrated resorts. M1 should benefit the most as it is a pure mobile operator. SingTel has maintained its muted guidance of low-single-digit growth for revenue and EBITDA for FY3/10 which should easily be achieved with the help of A$ strength and strong growth in its IT and Engineering division from NGNBN rollout. On the downside, we expect competition to stiffen in the residential and corporate broadband markets throughout this year while content costs should remain a medium to long-term issue. We do, however, expect heavy subsidies for devices to persist in line with recent trends.
SPH – DBS
Strong AdEx recovery, higher DPS
• Jan AdEx jumped a strong 26% yoy; recovery not fully reflected in share price
• Upsized S$600m MTN a positive move – higher dividends or investment on the cards
• Raise our DPS expectations; sustained yield of 6.6%-7.2% is an attractive proposition
• Proxy to recovering economy, a key pick in current market conditions; Reiterate Buy, TP: S$4.32
Strong AdEx growth in January implies potential upside to forecasts. Data from Nielsen Media Research shows AdEx for display and classifieds grew by a strong 26% yoy in Jan and 7.8% for the period from Sep-Jan. This is inline with our full year assumptions of 8% for FY10F, but believe there could be room for upside revision arising from activities such as (i) opening of Marina Bay Sands, coupled with more retail space; (ii) pick up in employment and hence recruitment ads; (iii) more property launches, etc. Newspaper operations PBIT should see a sharp 28% growth in FY10F, after the 24% drop in FY09. Our sensitivity analysis shows that a 1% change in ad revenues growth will impact newspaper PAT by 1.6%.
S$600m MTN – a positive move. The upsized S$600m MTN issue (i) reflects market confidence in the company’s fundamentals; (ii) capitalizes on the low interest rate environment at 2.81% pa; (iii) secures funding for Clementi Mall; and, (iv) signals the possibility of investments and/or higher dividends (along with completion of Sky11).
Clementi Mall saga priced in; potential S$22-26m from M1 capital reduction. We believe Clementi Mall overbidding saga has been priced in; and, a repeat of an overbidding is unlikely. We could see additional cash for SPH (1.3-1.6 Scts/share), from a capital reduction exercise by M1, expected by our telco analyst.
Raise DPS forecasts, potential yield of 7.2%. We have revised our DPS expectations to 27 Scts (+2 Scts) and 25 Scts (+5 Scts) for FY10 and FY11 respectively. FY10F EPS trimmed marginally by 2.6% on higher interest expense, excluding returns from application of funds. We like this counter as a proxy for the recovering economy, coupled with its attractive yield of 6.6%-7.2%.
Raffles Medical – DBS
Strong pick up in patient load
• 4Q net profit exceeded our expectation on pick up in patient load and margins expansion
• Potential special dividends on high net cash level (c.S$90m/17.3Scents) by FYE10F
• Raise earnings by 17%/24%; CAGR of 21%
• Upgrade to Buy, TP raised to S$1.75 (33% upside)
Strong 4Q, net profits up 25%. 4Q revenue increased 13% yoy to S$58.3m driven by both Hospital and Healthcare services division, 8% above our expectations. 4Q EBIT margins expanded by 1.1ppt yoy and 1.6ppt qoq on slower growth in staff costs (+12%), other operating expenses (+3%) and lower depreciation (-3%). Consequently, net profit grew a strong 25% yoy to S$11.9m, above streets’ estimates (S$10.3m) and ours (S$9.6m). Net profit for FY09 ended at S$37.9m, a strong 20% growth in a year of recession. A 2 Scts final dividend was proposed, bringing FY09 total dividend to 3 Scts (FY08: 2.5 Scts).
Higher patient load, 4 new clinics in FY10. Management attributed revenue growth to a pick up in patient load as the economy climbs out of recession and fears of H1N1 fade. 4Q growth was stronger than expected and management projects momentum to continue. 4 new clinics will be opened in FY10F, adding to its existing network of 71 clinics in Singapore.
$50m net cash in kitty. The Group has cash holding of S$74.4m or S$50m (9.6 Scts/share) on a net cash basis. We project that the net cash will balloon further to S$90m (17.3 Scents/share) by end FY10. If the funds are not deployed, there is a high potential for special dividends, in our view. Assuming it retains S$50m net cash, this would avail up to S$40m for dividend distribution, equating to c.7.7 Scts/share.
Strong growth ahead; Upgrade to Buy, TP: S$1.75. The growth trend should continue, and with operating leverage, we raised earnings by 17%/24% for FY10F/FY11F. TP raised to S$1.75 pegged at 20x (historical mean) on FY10F EPS. Buy for its: (i) proven track record; (ii) improving operations; and, (iii) strong growth (15.6x PE, PEG 0.75x<1x). Catalyst could come from acquisitions or special dividends given its high cash level.
Raffles Medical – CIMB
Strong 4Q09, dividend lifted
• Maintain Outperform; results above. With a stronger-than-expected 4Q09 net profit of S$11.9m (+24.3% yoy, 31.3% of our full-year forecast), FY09 net profit was S$37.8m (+20.1%), 7.9% ahead of our expectations owing to robust operating results from Hospital Services. The results also beat consensus expectations. We raise our FY10-11 estimates by 2.1-2.4% to reflect higher revenue and margin assumptions for both healthcare services and the hospital division. We also introduce FY12 numbers. Our target price rises from S$1.63 to S$1.66 following our upgrade, still based on 16x CY11 P/E. With its defensive business that delivers consistent earnings, maintain Outperform. We expect stock catalysts from the addition of clinics, expansion of medical specialties, and higher foreign-patient catchments.
• Occupancy and patient load steady. Revenue from Healthcare Services and the hospital segment grew 10.2% and 7.9% yoy respectively. Average occupancy was stable at around 60%. Foreign patients still formed a third of the patient load with Indonesian patients accounting for 22% of the foreigners. This partly explained the increase in foreign patient volume.
• Hallmark operating efficiencies. Operating profit increased to S$45.5m (+16.6% yoy) in FY09, attributable to improved patient admissions on the back of more clinics, added services and operating leverage. FY09 EBITDA margins improved 1.2% pts yoy to 23.8%. Staff expenses for FY09 rose only 6.7% yoy, below the pace of revenue growth.
• Increase of DPS to 3Scts. Balance sheet was robust with a net cash position of S$49.9m. We mentioned before that RFMD could possibly use its balance sheet for capital-management exercises or higher dividend payouts. The group did not disappoint, having raised its DPS to 3 Scts for the year (from 2.5 Scts in FY08).
• Organic FY10 growth. The group plans to launch four new clinics in FY10 (Changi Business Park, Mapletree Business Park, Marina Boulevard and Serangoon). Within its flagship hospitals, new bed rollout and space rationalisation to make room for more beds will come in the year.
February 2010
Results Announcement
- 4 Feb 10 : StarHub (Q409) – EPS 4.33ct (todate 18.68ct) ; Div 5ct (todate 19ct)
- 9 Feb 10 (AM) : SingTel (Q310) – EPS 6.22ct (todate 18.17ct)
- 10 Feb 10 : ComfortDelgro (Q409) – EPS 2.59ct (10.52ct) ; Div 2.67ct (todate 5.3ct)
- 10 Feb 10 : SBSTransit (Q409) – EPS 3.81ct (17.75ct) ; Div 4.3ct (todate 8.8ct)
- 18 Feb 10 : STEng (Q409) – EPS 4.31ct (todate 14.78ct) ; Div 10.28ct (todate 13.28ct)
- 24 Feb 10 : MIIF (2H09) – Div 1.5ct (todate 3ct)
STI = 2750.86 (+1.71)
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SPH |
FY09 (Aug) |
26.0 |
25.0 |
$3.71 |
6.739% |
14.27 |
Interim 7ct ; Final 9ct + 9ct (Special) |
|
SingPost |
FY09 (Mar) |
7.726 |
6.25 |
$1.05 |
5.952% |
13.59 |
Q1, Q2, Q3 1.25ct ; Q4 2.5ct |
|
STI ETF |
Dec-09 |
— |
3.00 |
$2.79 |
2.151% |
— |
Dec09 3ct ; Jun09 4ct |
|
ST Engg |
FY09 (Dec) |
14.78 |
13.28 |
$3.13 |
4.243% |
21.18 |
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 |
$1.72 |
5.116% |
9.69 |
Interim 4.5ct ; Final 4.3ct |
|
ComfortDelGro |
FY09 (Dec) |
10.52 |
5.30 |
$1.55 |
3.419% |
14.73 |
Interim 2.63ct ; Final 2.67ct |
|
SMRT |
FY09 (Mar) |
10.70 |
7.75 |
$1.96 |
3.954% |
18.32 |
Interim 1.75ct ; Final 6.0ct |
TELCO
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SingTel |
FY09 (Mar) |
21.67 |
12.5 |
$3.05 |
4.098% |
14.07 |
Interim 5.6ct ; Final 6.9ct |
|
M1 |
FY09 (Dec) |
16.80 |
13.40 |
$2.06 |
6.505% |
12.26 |
Interim 6.2ct ; Final 7.2ct |
|
StarHub |
FY09 (Dec) |
18.68 |
19.00 |
$2.14 |
8.879% |
11.46 |
Q1 4.5ct ; Q2 4.5ct ; Q3 5ct ; Q4 5ct |
Funds / Infrastructure
|
Stock |
Period |
DPS cts |
Mkt |
Yield |
NAV |
Div Breakdown |
|
SPAus |
1H10 (Sep-09) |
A4.0 (Gross) |
$1.18 |
8.492% |
A$0.91 |
2H09 A5.6578ct ; 1H09 A5.7431ct |
|
MIIF |
2H – Dec09 |
1.50 |
$0.510 |
5.882% |
$0.84 |
2H09 1.5ct ; 1H09 1.5ct |
* SPAus DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.2525) fm Yahoo
NOTES :
- Mkt Price is as on 26-Feb-10
- 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 : Q409 (Dec) – 5ct ; Q309 (Sep) – 5ct ; Q209 (Jun) – 4.5ct ; Q109 (Mar) – 4.5ct
- StarHub : FY10 Div Policy 20ct ie. 5ct/Q
- SingPost : Q310 (Dec09) – 1.25ct ; Q210 (Sep09) – 1.25ct ; Q110 (Jun09) – 1.25ct
- M1 : 2H09 (Dec) – Final 7.2ct ; 1H09 (Jun) – Interim 6.2ct
- SPAus : 1H09 (Sep08) – A4ct (before tax) / Est. A3.8113ct (after tax)
- SingTel : 1H10 (Sep09) – Interim 6.2ct
- SMRT : Q210 (Sep09) – Interim 1.75ct
- SPH : 2H09 (Aug) – Final 9ct ; Special 9ct ; 1H09 (Feb) – 7ct
- SPAus : Projected DPU = A8ct (FY10 – Year End Mar-10) ; 1-for-4 Rights @ A$0.78/S$0.86