SingTel – DBS
Beneficiary of large iPhone subscriber base
At a Glance
• Underlying profit of S$990m inline with ours, slightly above consensus expectations of S$970m.
• Singapore business and Optus delivered strong performances in the mobile business.
• We believe that iPhone customers acquired over the last one and a half year would continue to benefit SingTel
• Maintain BUY and TP for sustained mobile momentum, growth at Telkomsel, stronger regional currencies and potential re-listing of Optus as the catalyst.
Comment on Results
Singapore profit slightly higher than expectations. Singapore net profit of S$343m (+ 7% yoy, +8% qoq) was slightly higher than our expectation of S$320m, due to (i) strong performance in the mobile segment with revenue up 9% yoy and +6% qoq (ii) Fibre roll out revenue of S$55m, up 77% qoq was also impressive. Singapore EBITDA stood at S$580m (+ 3% yoy, +4% qoq). Mobile market share was stable qoq at 46.2%. Pay TV subscriber base increased by 29K (versus 25K in 2Q10) from strong take up of bundled mio Home plans to reach 155K.
Australia profit slightly higher. Net profit of A$165m (+16% yoy, +8% qoq) was helped by strong mobile performance where revenue stood at A$1459 (+10% yoy, +6% qoq) while mobile EBITDA margins were stable qoq at 25%. Optus EBITDA stood at A$529m (+4% yoy, +4% qoq). Optus continued to add mobile subscribers while strong A$ (up 6% qoq) continues to lend support.
Associate results slightly below. Post-tax contribution of S$460m (+23% yoy, -3% qoq) was slightly below our expectations of S$470m as Telkomsel’s profit contribution at S$171m (+55% yoy, -7% qoq) was impacted by accelerated depreciation charges resulting from the shortening of useful life of certain network assets. Further strengthening of IDR should offset the negatives in our view.
SingTel
All the data are extracted from the results,
|
|
Q3-Dec08 |
Q4-Mar09 |
FY09 |
Q1-Jun09 |
Q2-Sep09 |
Q3-Dec09 |
|
Revenue |
3,701 |
3,566 |
14,934 |
3,848 |
4,103 |
4,450 |
|
GP |
1,057 |
1,150 |
4,431 |
1,128 |
1,149 |
1,233 |
|
Operating Profit |
671 |
398 |
2,379 |
687 |
690 |
748 |
|
PBT |
921 |
982 |
3,947 |
1,100 |
1,087 |
1,132 |
|
Net Profit |
799 |
904 |
3,449 |
946 |
956 |
990 |
|
NPM |
21.60% |
25.34% |
23.10% |
24.58% |
23.30% |
22.25% |
|
Cash |
1,220 |
1,076 |
<- |
1,086 |
1,208 |
1,615 |
|
Loan – NCL |
6,099 |
6,061 |
<- |
5,582 |
5,968 |
6,189 |
|
Loan – CL |
1,048 |
1,434 |
<- |
1,274 |
1,007 |
755 |
|
NAV (ct) |
120.41 |
128.67 |
<- |
138.72 |
139.49 |
140.59 |
|
EPS (ct) |
5.02 |
5.68 |
21.67 |
5.94 |
6.00 |
6.22 |
|
DPS (ct) |
— |
6.90 |
12.50 |
— |
6.20 |
— |
Notes :
- All figures in S$Mil unless otherwise stated
- FY is End-Mar
SingTel – BT
SingTel gains more handphone customers
Total of 3.2m – a 46% share of the market – cements its leading position
SINGTEL said its total handphone customers in Singapore grew to 3.2 million by end-December 2009, up 8.1 per cent from a year ago.
According to the company, it added 81,000 new customers in the quarter. This brings its total mobile customer base to 3.2 million, cementing its lead in the market.
SingTel’s estimated market share is 46.2 per cent based on the latest data from regulator Infocomm Development Authority of Singapore.
The telco reports its third quarter results today.
SingTel said its iPhone offerings helped drive strong demand and contributed to 36,000 new postpaid customers, up from 30,000 in the previous quarter. It also gained 45,000 prepaid customers with targeted acquisition promotions.
In the region, the group said on an aggregate basis, the combined mobile customer base rose to 285 million as at Dec 31, 2009, an increase of 23 per cent, or 52 million from a year ago.
Besides its wholly owned Australian Optus, SingTel also owns stakes in telcos in India, Indonesia, Thailand, Bangladesh, Pakistan and the Philippines.
SingTel’s largest associate Bharti added 8.4 million mobile customers for the quarter, up from 8.1 million a quarter ago. Its mobile customer base as at Dec 31, 2009, increased 39 per cent, or 33.2 million from a year ago, to 118.9 million.
Last November, SingTel announced plans to raise its stake in the Indian operator from 30.43 per cent to 31.95 per cent through the purchase of an additional 730,000 shares.
Its Indonesian associate Telkomsel grew its mobile customer base by 25 per cent, or 16.3 million from a year ago, to 81.6 million.
Optus said postpaid customers grew a record 164,000 during the quarter, to more than four million as at Dec 31, 2009.
During the quarter, Optus tightened its churn policy for customers who remained inactive after various recharge campaigns, and deactivated 272,000 prepaid customers. This resulted in a decline of 145,000 Optus prepaid customers for the quarter with total prepaid customers of 4.2 million as at Dec 31, 2009.
StarHub – CIMB
Goodies priced in
• Downgrade to UNDERPERFORM. FY09 results were broadly in line, at 98% and 99% of our forecast and consensus respectively. StarHub declared a final DPS of 5 cts, taking full-year DPS to 19 cts, in line with our forecast. Key takeaways were: 1) weaker margins; 2) continued pressure in fixed broadband and fixed network services; and 3) a subdued FY10 outlook. We trim our FY10-11 EPS estimates by 2% and our DCF-based target price from S$2.15 to $2.14 (WACC 9.7%) following higher capex guidance and housekeeping adjustments. We downgrade the stock from Neutral to UNDERPERFORM following its recent strong share-price performance coupled with investors’ preference for cyclical stocks. We believe the stock has largely priced in its higher dividend payout and StarHub would face pricing and margin pressure from NGNBN. We recommend a switch to M1 (Outperform, TP: S$2.07), for its capital-management potential and benefits from NGNBN. We have introduced FY12 forecasts in this report.
• Slight seasonal bounce but margin weakness. Stripping away a 35% growth in handset sales, StarHub’s service revenue only climbed 1% qoq despite growth in all divisions except fixed network services. Like M1 (+1.6% qoq), StarHub’s mobile revenue rose 1.4% qoq, aided by increased usage, its iPhone launch and strong take-up of data services. Broadband revenue was flat qoq as a 2% subscriber increase was offset by a similar reduction in ARPU. EBITDA margin was down 4.4% pts qoq owing to higher acquisition costs from the expensing of iPhones and heavier promotions/marketing.
• Subdued 2010 guidance. StarHub guided for rather muted low-single-digit growth in FY10 topline. The growth would be aided by the economic recovery, the opening of two integrated resorts along with growth in mobile voice, mobile data, wireless broadband and fixed data, though offset by lower fixed broadband and pay-TV revenue due to competition ahead of the launch of NGNBN. It also expects a lower FY10 service EBITDA margin of 30% (31.7% in FY09) due to start-up costs for OpCo and its own RSP, broadband discounts, high content costs and iPhone subsidies. StarHub raised its cash capex to a maximum of 14% of sales from 13%. Finally, it kept its dividend policy of a minimum DPS of 5 cts/quarter for 2010.
StarHub – ML
A year of reckoning
DPS of 20cps seems unsustainable; Maintain Underperform
We maintain Underperform rating post 4QFY09 results, which missed ours and consensus estimates. We believe that StarHub’s business model is facing unprecedented pressure on multiple fronts – intensified bundling discounts to defend pay TV base post EPL loss, spike in fixed broadband competition in runup to NBN rollout, mobile hitting low single-digit growth era with penetration >136%. This is likely to result in a structural FCF declines. We estimate StarHub’s FCF to average ~S$320mn p.a. for 2010-12 vs S$415mn p.a. in 2006-9. Hence,
we question the sustainability of the committed S$343mn p.a. or 20cps dividend.
Guidance suggests tough times ahead, declining FCF
Mgt’s FY10 guidance include low single-digit revenue growth, service EBITDA margin of ~30% (-1.8ppts YoY) and higher capex/sales of 14% vs 11% in 2009. We also understand that cash tax will start kicking in from 4Q10.
4QFY09 disappoints on margin pressure
4QFY09 EBITDA of S$152mn (-12% QoQ, -8% YoY) was below ours and consensus estimates. This was due to sharper than expected margin erosion from iPhone launch and pricing pressure at fixed broadband & fixed network services.
PO & f’casts raised; More +ve on ability to retain subs
We raise our PO by ~10% to S$2.00 and FY11-12E EBITDA by ~6% to reflect a more optimistic view of the EPL content loss impact on StarHub. We now only assume 10% of StarHub’s pay TV franchise will leave vs our previous view of 15% pay TV subscribers leaving and 50% of them walking with a mobile and fixed broadband plan. We think StarHub’s strategy of driving pay TV adoption by dropping prices, expanding content range and bundled discounts are likely to drive subscriber stickiness going into 2H10 when EPL moves to SingTel (SNGNF, S$2.98, B-1-8).