SGX Yield Stock

3Q10 Results

SingTel reported 3Q10 operating revenue of S$4,450m (+20.2% yoy) and net profit of S$991m (+24.0% yoy). We were impressed by its strong performance as revenue was 3.0% above our estimate of S$4,321m while net profit was 3.6% higher than our estimate of S$957m. SingTel’s Singapore operations posted revenue growth of 1.5% to S$1,530m. Its Australian unit, Optus, reported revenue increase of 4.8% to A$2,302m. In Singapore dollar terms, Optus revenue rose by 33.1% to S$2,920m due mainly to the appreciation of the Australian dollar. Furthermore, the share of regional associates’ earnings increased by 22.0% to S$592m due to the improvement in Telkomsel’s performance. 

Greater market share in Pay TV

SingTel has won the rights for Barclays Premier League (BPL) matches for three years from August 2010. It is offering subscription for BPL matches at an attractive price of S$23 per month excluding goods and services tax (GST). We expect about 90,000 football fans to switch from StarHub to SingTel. At the same time, SingTel is likely to introduce more programs on its mioTV to boost its customer base and grab market share from StarHub. 

Listing of Optus

There has been market speculation that SingTel may list Optus on the Australian stock exchange. We feel that it is likely to happen only if SingTel requires the funds for regional expansion such as acquiring a stake in a mobile telecommunications provider in an emerging country. Otherwise, SingTel has sufficient cash to maintain its operations. 

FY2010F Outlook

The company expects the operating revenue for the Singapore and Australian businesses to grow at low single-digit level. The earnings of Bharti and Telkomsel are also likely to improve in local currency terms. It anticipates the regional mobile associates to announce lower ordinary dividends. 

Maintain BUY recommendation and fair value at S$3.52

SingTel has reported better-than-expected results for 3Q10. It is also expected to benefit from the recovery of the global economy. We like SingTel for its growth prospects as its Singapore and Australian operations as well as regional mobile associates continue to post increases in revenue and profit. Therefore, we maintain our buy recommendation. Based on the discounted cash flow model, the fair value is S$3.52.

SingTel scores a sizzler, with mio TV base up 23%

A passion for football and a good bargain appear to have cooled the controversy over hardware compatibility and content exclusivity, with Singapore Telecommunications registering sizzling growth in its pay TV subscribers.

Singapore’s largest telco added 29,000 new mio TV customers for the three months ended Dec 31, the same quarter it outbid rival StarHub to score the exclusive right to broadcast the 2010 to 2013 seasons of the Barclays Premier League (BPL).The 23 per cent increase is the biggest quarterly gain it has recorded since the inception of the Internet- based television service in 2008 and early proof that the pricey league could indeed be the game-changer for the firm’s fledgling pay television business.

The recent customer boom lifted SingTel’s pay TV base to a sizeable 155,000 at the end of December, and the numbers are expected to swell further in the coming months. StarHub, however, still has a sizeable lead with a cable TV customer tally of 539,000.

Still, year-on-year, total mio TV subscribers have grown by 163 per cent.

‘The minute the (current BPL) season ends, we expect our (mio TV) installation rate to increase yet again,’ said SingTel Singapore CEO Allen Lew, without providing projections.

All this has taken place despite the stormy exchanges in online forums and newspapers since SingTel’s BPL coup last October.

It sparked a heated debate over the thorny issue of content exclusivity and the hassle of requiring separate set-tops for programmes from different pay TV operators.

StarHub added fuel to the fire with its failed offer to carry SingTel’s sports programming on its cable television platform, while government agencies said that they were looking into the longer-term possibility of having a unifying set-top.

To further stoke the fire, some customers who recently signed up for SingTel’s mio TV packages complained of lengthy waiting times and technical glitches, which the company had attributed to the manpower strain from the surge in installation requests.

‘We have increased the number of installers that we have at our disposal to cope with the demand. And we are preparing them to cope with an even bigger influx (of customers) that we expect to come in the June to July timeframe,’ Mr Lew said.

To draw subscribers to its camp, the company is currently dangling an early-bird promotion which includes access to all 380 matches in the upcoming BPL season, as well as UEFA Champions League and Europa League ties, for $23 a month. Customers can pay $2 more for additional channels from ESPN Star Sports.

StarHub customers currently pay $25 a month for its sports group on top of a basic subscription, which starts from around $25.

In addition, SingTel customers can be assured that the installation crew will only fix up the mio TV hardware when they are at home to oversee the process, Mr Lew said.

‘After every single installation, our manager will call the homeowner. It’s not just a random sample check, it’s a 100 per cent check,’ he told BT at the sidelines of the firm’s third-quarter results briefing.

SingTel yesterday posted a third consecutive quarter of bottomline improvement with a 24 per cent jump in Q3 net profit to $991 million.

Underlying earnings per share for the three months ended Dec 31 climbed 18.3 per cent to 6.22 cents, while operating revenue rose 20.2 per cent to $4.45 billion.

SingTel profit jumps 24% in Q3

Telco benefited from stronger Aussie dollar and rebound in Telkomsel earnings

SINGAPORE Telecommunications makes it a hat-trick with its net profit rising for the third straight quarter on the back of yet another strong overseas performance.

South-east Asia’s largest telco yesterday reported a 24 per cent jump in net income for its fiscal third quarter to $991 million, up from $799 million last year.

Earnings per share for the three months ended Dec 31, 2009, climbed 23.9 per cent to 6.22 cents, while operating revenue rose 20.2 per cent to $4.45 billion.

SingTel, which derives 73 per cent of its Ebitda – earnings before interest, tax, depreciation and amortisation – from overseas, benefited from the appreciation of the Australian dollar and a rebound in Indonesia associate Telkomsel’s earnings during the quarter.

Pre-tax profit contributions from the group’s six regional affiliates – Bharti Airtel, Telkomsel, Globe, AIS, Warid and PBTL – grew 21.3 per cent to $560 million during the quarter.

Star performer Telkomsel grew its contributions by 53.1 per cent to $238 million in Q3 following the ceasefire in the price war between Indonesian telcos.

Bharti Airtel, SingTel’s largest overseas associate, was next in line with its share of profits rising 4.6 per cent year-on-year to $235 million.

At the start of the quarter, Bharti failed in its second attempt to merge with South African telco, MTN Group. However, it pressed ahead with plans for overseas diversification by snapping up a 70 per cent stake in Sri Lankan operator Warid for US$300 million last month.

SingTel was initially mulling a top-up in Bharti as its stake in the Indian telco would have been diluted through the MTN union.

‘We work as strategic partners to our various associates and we would discuss with them whether it made sense for us to go on our own or to work with the associates (for overseas acquisitions),’ SingTel group chief executive Chua Sock Koong told reporters at its result briefing.

‘In some cases (such as the Bharti-MTN deal), it made sense for the associate to be leading the transaction,’ she said. ‘Our focus remains on Asia. We are also looking at some adjacent markets, including Africa and the Middle East.’

Profit contributions from Globe in the Philippines and AIS in Thailand fell 5.7 per cent and 12.2 per cent in the third quarter to $54 million and $52 million respectively.

SingTel’s remaining associates – Pakistani operator Warid and PBTL in Bangladesh – continue to be in the red with losses of $15 million and $4 million.

Profits from SingTel’s Australian unit Optus soared 47.4 per cent to $210 million in Q3 due to the strengthening of the Australian dollar.

The Aussie dollar’s appreciation and Optus’ strong performance in recent quarters again triggered speculation that SingTel could be looking to cash out by selling off a partial stake in the subsidiary.

‘No decision has been made on selling or listing Optus. Optus continues to generate healthy cash flows and it is a significant contributor to SingTel’s overall financial performance,’ Ms Chua stressed.

The group’s Singapore operations registered a 6.5 per cent rise in net profit to $343 million due to tighter cost control measures.

Revenue from its local telecommunications business grew 1.8 per cent to $1.2 billion during the quarter, while sales from its IT and engineering arm edged up marginally by 0.6 per cent to $363 million.

In the previous corresponding period, the company’s IT and engineering revenue included the results of Singapore Computer Systems (SCS) for the four-month period of September to December 2008. Wholly owned SCS was acquired in September 2008.

Excluding SCS’ revenue for September 2008 in the last corresponding quarter, IT and engineering revenue rose 13 per cent year on year.

For the first nine months of this financial year, SingTel’s group net profit grew 13.6 per cent to $2.9 billion on the back of a 9.1 per cent increase in sales to $12.4 billion.

Looking ahead to the full year, SingTel has reaffirmed its guidance of growing its Ebitda in Singapore and Australia at the single-digit level. It also expects pre-tax earnings from Bharti and Telkomsel to rise in local currency terms.

SingTel shares closed eight cents higher at $3.03 yesterday.

Favourable forex rates boosts results further

• SingTel’s 3QFY10 results came in ahead of expectations. Net profit surged a strong 24% YoY to S$991mil, with underlying net profit (i.e. excluding exceptionals) at S$990mil – a strong 18% YoY growth.

• Results were largely helped by favourable forex movements from a strong Australian dollar, which appreciated 27% YoY. This helped contribution from wholly-owned Optus in Australia to jump 48% to S$210 in net profit. Optus accounted for 21% of group net, up from 18% a year ago.

• Besides help from forex rates, SingTel’s core operations also performed well. Its operations in Singapore grew net profit by 7%, making up a third of group earnings. At the same time, Optus enjoyed a healthy 15% YoY net profit growth in local currency terms.

• Mobile segment was a key driver, largely due to strong iPhone take-up. Mobile accounted for 42% of group revenues. Second key segment was data and Internet, which grew 15% YoY and made up 19% of revenue.

• Despite stiff competitive pressures in its mature markets, EBITDA margins maintained – 37% in Singapore and 23% in Australia.

• Contributions from associates jumped 22% YoY to S$592mil, and accounted for 44% of EBIT. This was mainly due to a turnaround in Telkomsel’s (Indonesia) earnings combined with a 6% YoY appreciation of the Indonesian Rupiah. Telkomsel thus accounted for 40% of associates, while Bharti made up another 40% – with a 7% YoY increase in contribution.

• We maintain our forecasts, as well as fair value (FV) at S$3.05/share. With the stock trading around FV, we are maintaining our rating at HOLD.

• Free cash flows remain strong, supporting our expectation of DPS at 12.5 cents Singapore for full year. A 6.2 cent DPS was paid out for 1HFY10. While management guides for slightly lower cash flows for Singapore and dividends from associates – this will be offset by higher translated cash flows from Optus.

Relatively upbeat 3Q10 results

Upbeat 3Q10 results. SingTel has released a relatively upbeat set of 3Q10 results this morning, with revenue up 20.2% YoY and 8.5% QoQ at S$4449.8m, driven by steady growth from Singapore and Australia and assisted by the stronger AUD, while net profit climbed 24.0% YoY and 3.6% QoQ to S$990.7m. Excluding exceptionals, underlying net profit rose 18.2% YoY and 4.0% QoQ to S$990.3m. Associates’ earnings contribution also put in a strong 39.5% YoY jump (though down 1.5% QoQ) to S$459.5m, thanks to a sharp improvement in Telkomsel’s performance and the associates’ fair value gains on forex adjustments. 9M09 revenue rose 9.1% to S$12400.3m, meeting 84.1% of our FY10 forecast, while net profit was up 13.6% at S$2892.1m; underlying net profit climbed 15.7% to S$2887.3m, meeting 83.5% of our full-year estimate.

Stable Singapore showing. Singapore operations put in a stable showing as guided. Revenue grew by 1.5% YoY and 6.1% QoQ to S$1530m, which also included S$55m revenue from the fibre rollout (vs. S$14m in 1QFY10 and S$31m in 2QFY10). Mainstay mobile business jumped 8.8% YoY and 5.7% QoQ, after adding another 81k of new subscribers for the quarter. Its fledging mio TV service also added another 29k users, bringing total subscribers to 155k; numbers are expected to increase after mid-2010 with the start of the EPL broadcast. Overall operational EBITDA margin slipped from 38.6% in 2QFY10 to 37.9% in 3QFY10, but still in line with its EBITDA margin guidance of 36-38% for FY10. It expects its EBITDA to grow at low single-digit level and other guidances also remain unchanged.

Improving Australia operations. SingTel’s Australia business saw a 4.8% YoY (+3.8% QoQ) rise in operating revenue to A$2302m, again aided by decent mobile revenue growth (+9.6% YoY, +5.6% QoQ), which contributed 63% to total revenue; its contribution to EBITDA was also higher at 68% vs. 67% a year ago. For the rest of FY10, SingTel expects Australia’s operating revenue and EBITDA to grow at low singledigit levels; capex at around A$1.1b; and free cashflow to be stable.

Maintain BUY and S$3.51 fair value. For its associates, 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. We are raising our FY10 revenue by 7.1% and earnings by 3.1% in view of the better than-expected 3QFY10 showing. But our SOTP fair value remains at S$3.51 and we maintain our BUY rating.