TELCOs – CIMB
Ringing up Mr Data
We upgrade Singapore’s telco sector to Neutral from Underweight following the 1Q13 results season on: 1) the surging adoption of tiered mobile plans; and 2) after upgrading SingTel to Neutral from Underperform on lower competition issues in Australia.
Nevertheless, competition in fixed broadband and pay TV remains a concern, especially for StarHub. We are also Neutral on the sector as valuations are still not compelling despite the recent de-rating. M1 (Outperform) is our top pick as it should be the biggest beneficiary of the adoption of tiered data plans and is also developing a new revenue stream in fixed broadband.
1Q13 results mainly in line
M1 and StarHub matched our estimates. As expected, StarHub declared a 5 Sct DPS while M1 did not. SingTel bucked the trend as its 4QFY3/13 earnings beat consensus and our expectations on the back of surprises from AIS, Globe, and Telkomsel. It also declared a 10 Sct DPS, above our expectation of 9 Scts.
Review of operations
Sector mobile revenue grew 2.5% yoy in 1Q13, up from 2.1% in 4Q12 as the shift to tiered data plans improved monetisation.
Pay-TV revenue remained flat from stiff competition. SingTel continued to take market share from StarHub. StarHub is preparing for BPL cross-carriage as ordered by the regulator despite SingTel’s appeal to reverse the order.
Fixed-broadband revenue remained muted, with growth down to 4.8% in 1Q13 from over 8% in the previous two quarters. This was despite rising fibre subscribers and could be blamed on intense competition.
2013 outlook still muted
Capex for the three telcos will be elevated for 2013 and should remain so in 2014, largely on LTE/4G spending. While M1 expects moderate earnings growth this year, SingTel and StarHub are more muted in their 2013 guidance. SingTel expects FY14 EBITDA to grow by low single digits and has raised its payouts to 60-75% from 55-70%. StarHub trimmed its revenue-growth guidance to low single digits from single digits and kept its EBITDA margins at 31%. Both M1 and StarHub have maintained their dividend guidance.
StarHub – OCBC
UPGRADE TO HOLD ON VALUATION GROUNDS
- 15% correction
- Yields back at 5%
- Upgrade to HOLD
Sharp fall after we downgraded our call
StarHub Ltd saw a sharp drop in its share price after we downgraded our call from Hold to Sell on 10 May following its 4Q12 results announcement; note that it had also lowered its revenue growth guidance from single-digit to low single-digit while maintaining its EBITDA margin on service revenue at 31% (versus 33% in 1Q13). Since then, the share price has fallen some 15% from S$4.72 to a recent low of S$4.01.
Rationale for our previous downgrade
However, we note the stock price has outperformed not only its peers but also the STI – and this outperformance was mainly driven by investors searching for yield. In our view, we do not see this as sustainable as this has made valuations pricey and the yield had also fallen to some 4.2%. And this made it “vulnerable” should the yield compression story falter. We were also concerned by the possibility of seeing a flight of out of the more defensive counters like telcos should investors take a more “risk on” approach. On hindsight, it appears that we were correct on both counts.
Revising fair value down to S$3.82
Going forward, the risk of rising bond yields could continue to sink the yield compression story. And since we are using a DCF-based valuation methodology, higher bond yields will result in our fair value easing from S$4.00 to S$3.82. Fortunately, as StarHub has maintained its S$0.20/share dividend payout this year (and is likely to continue to do so in our view), its dividend yield has risen back to around 5% (or 5.2% based on our fair value). From a valuation perspective, we upgrade our call from Sell to HOLD.
ComfortDelgro – MayBank Kim Eng
Growth through acquisition
Focusing on the business units that matter. Despite the diversity of CDG’s businesses, three major business units (Singapore Taxi: 23%, Australia Bus: 22%, UK/Ireland Bus: 12%) would collectively account for more than 56% of the group’s FY15E operating profits. While certain business units will experience near term challenges, these three core profit contributors will sustain the group’s earnings over the next 3 years.
UK & Australia bus to lead profit growth. Driven by a series of acquisitions, we forecast annual EBIT growth of 7% and 4% for CDG’s UK and Australia bus businesses over the next 3 years. Leveraging on their growing scale of operation, successful bids for new routes would provide further upside to our forecasts.
Singapore Taxi remains a key profit contributor. Despite conceding market share over the past 5 years (FY12: 58% vs FY07: 64%), management had demonstrated a strong profit focus at its Taxi operations in Singapore. While its fleet grew by merely 2% p.a. between FY08 to FY12, EBIT increased at a CAGR of 16% from SGD52mn to SGD93mn over the same period of time. We attribute the strong profitability of CDG’s operation to two key factors: 1) prudent fleet expansion at a time of high COE prices and 2) leveraging on its scale to grow an alternative income stream.
Limited exposure to negatives at Singapore’s fare based business. Profitability of Singapore’s rail and bus operators had been under pressure. While we have a negative near term view on Singapore’s fare based businesses, we argue that CDG’s diversification efforts have reduced their dependency on them. With CDG’s exposure to Singapore’s fare based at merely 8% of its market capitalization, we believe that their exposure is limited.
Valuation. CDG offers a unique defensive stock exposure with diversified earnings and geographical exposure. With continued weakness on the economic front, we expect sustained preference for defensive stocks in the year ahead. We value CDG using a FY14E P/E of 18X and derive a TP of SGD2.33. Upgrade to Buy.
May 2013
Results Announcement
- 6 May 13 (AM) : SingPost (Q413) – EPS 1.185ct (todate 6.435ct) ; Div 2.5ct (todate 6.25ct)
- 7 May 13 : STEng (Q113) – EPS 4.34ct
- 9 May 13 : StarHub (Q113) – EPS 5.3ct ; Div 5ct
- 13 May 13 : SBSTransit (Q113) – EPS 0.92ct
- 14 May 13 : SIAEC (Q413) – EPS 5.96ct (todate 24.51ct) ; Div 15ct (todate 22ct)
- 14 May 13 : ComfortDelgro (Q113) – EPS 2.74ct
- 15 May 13 (AM) : SingTel (Q413) – EPS 5.45ct (todate 22.02ct) ; Div 10ct (todate 16.8ct)
- 15 May 13 (AM) : SATS (Q413) – EPS 4.2ct (todate 16.6ct) ; Div 10ct (todate 15ct)
- 15 May 13 (AM) : SPAusNet (2H13) – Gross Div A4.1ct
STI = 3311.37 (-56.81 for May)
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
HL Fin |
FY12 (Dec) |
17.60 |
12.00 |
$2.720 |
4.412% |
15.45 |
Interim 4ct ; Final 8ct |
|
SingPost |
FY13 (Mar) |
6.435 |
6.25 |
$1.310 |
4.771% |
20.36 |
Q1, Q2, Q3 1.25ct ; Q4 2.5ct |
|
SPH |
FY12 (Aug) |
23 |
24.0 |
$4.270 |
5.621% |
18.57 |
Interim 7ct ; Final 9ct + Special 8ct |
Aviation Services
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SATS |
FY13 (Mar) |
16.60 |
15.0 |
$3.260 |
4.601% |
19.64 |
Interim 5ct ; Final 6ct + Special 4ct |
|
SIA Engg |
FY13 (Mar) |
24.51 |
22.0 |
$5.070 |
4.339% |
20.69 |
Interim 7ct ; Final 15ct |
|
ST Engg |
FY12 (Dec) |
18.76 |
16.8 |
$4.090 |
4.108% |
21.80 |
Interim 3ct ; Final 4ct + Special 9.8ct |
Note : SATS Special Div is Observed to be Non-Recurring
Transport
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SBSTransit |
FY12 (Dec) |
6.01 |
3.00 |
$1.420 |
2.113% |
23.63 |
Interim 1.35ct ; Final 1.65ct |
|
ComfortDelGro |
FY12 (Dec) |
11.89 |
6.40 |
$1.905 |
3.360% |
16.02 |
Interim 2.9ct ; Final 3.5ct |
|
SMRT |
FY13 (Mar) |
5.5 |
2.50 |
$1.430 |
1.748% |
26.00 |
Interim 1.5ct ; Final 1.0ct |
TELCO
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SingTel |
FY13 (Mar) |
22.02 |
16.8 |
$3.750 |
4.480% |
17.03 |
Interim 6.8ct ; Final 10ct |
|
M1 |
FY12 (Dec) |
16.1 |
14.6 |
$3.140 |
4.650% |
19.50 |
Interim 6.6ct ; Final 6.3ct + Special 1.7ct |
|
StarHub |
FY12 (Dec) |
20.93 |
20 |
$4.010 |
4.988% |
19.16 |
Q1 5ct ; Q2 5ct ; Q3 5ct ; Q4 5ct |
Funds / Infrastructure
|
Stock |
Period |
DPS cts |
Mkt |
Yield |
NAV |
Div Breakdown |
|
SPAus |
2H – Mar13 |
A4.1 (Gross) |
$1.460 |
6.796% |
A$0.91 |
1H13 A4.1ct ; 2H13 A4.1ct |
|
MIIF |
FY13 – Guidance |
1.90 |
$0.180 |
10.556% |
? |
1H12 2.75ct ; 2H12 2.75ct + 3ct (Special) |
* SPAus DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.2101) fm Yahoo
NOTES :
- Mkt Price is as on 31-May-13
- MIIF : FY13 Guidance 1H13 (Jun) –0.7ct ; 2H13 (Dec) – 1.2ct (Final) ; APTT IPO Entitlement / 1000 MIIF Shares (Estimate) = 457 APTT Shares or $443.29
- SPAus : 2H13 (Mar13) – A4.1ct = A1.367ct (Franked) + A2.649ct (Interest) + A0.084ct (Capital Returns) ; 1H13 (Sep12) – A4.1ct = A1.367ct (Franked) + A2.467ct (Interest) + A0.266ct (Capital Returns)
- SPAus : FY14 Guidance = A8.36ct
- SATSvcs : 2H13 (Mar13) – Final 6ct + Special 4ct ; 1H13 (Sep12) – Interim 5ct
- SingTel : 2H13 (Mar) – Final 10ct ; 1H13 (Sep12) – Interim 6.8ct ; Div Policy – 60% to 75% of Underlying Net Profit
- SIAEC : Q413 (Mar13) – Final 15ct ; Q213 (Sep12) – Interim 7ct
- StarHub : Q113 (Mar) – 5ct
- SingPost : Q413 (Mar13) – 2.5ct ; Q313 (Dec12) – 1.25ct ; Q213 (Sep12) – 1.25ct ; Q113 (Jun12) – 1.25ct
- SMRT : Q413 (Mar13) – Final 1.0ct ; Q213 (Sep12) – Interim 1.5ct
- SPH : 1H13 (Feb) – Interim = 7ct
- HLFin : 1H12 (Jun) – 4ct ; 2H12 (Dec) – 8ct (Final)
- ST Engg : 1H12 (Jun) – 3ct ; 2H12 (Dec) – 4ct (Final) + 9.8ct (Special)
- ComfortDelgro : Q412 (Dec) – 3.5ct ; Q212 (Jun) – 2.9ct
- StarHub : FY13 Div Guidance – 5ct/Q
- SBSTransit : Q212 (Jun) – 1.35ct ; Q412 (Dec) – 1.65ct
- M1 : 2H12 (Dec) – Final 6.3ct + Special 1.7ct ; 1H12 (Jun) – Interim 6.6ct
May 2013
Results Announcement
- 6 May 13 (AM) : SingPost (Q413) – EPS 1.185ct (todate 6.435ct) ; Div 2.5ct (todate 6.25ct)
- 7 May 13 : STEng (Q113) – EPS 4.34ct
- 9 May 13 : StarHub (Q113) – EPS 5.3ct ; Div 5ct
- 13 May 13 : SBSTransit (Q113) – EPS 0.92ct
- 14 May 13 : SIAEC (Q413) – EPS 5.96ct (todate 24.51ct) ; Div 15ct (todate 22ct)
- 14 May 13 : ComfortDelgro (Q113) – EPS 2.74ct
- 15 May 13 (AM) : SingTel (Q413) – EPS 5.45ct (todate 22.02ct) ; Div 10ct (todate 16.8ct)
- 15 May 13 (AM) : SATS (Q413) – EPS 4.2ct (todate 16.6ct) ; Div 10ct (todate 15ct)
- 15 May 13 (AM) : SPAusNet (2H13) – Gross Div A4.1ct
STI = 3311.37 (-56.81 for May)
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
HL Fin |
FY12 (Dec) |
17.60 |
12.00 |
$2.720 |
4.412% |
15.45 |
Interim 4ct ; Final 8ct |
|
SingPost |
FY13 (Mar) |
6.435 |
6.25 |
$1.310 |
4.771% |
20.36 |
Q1, Q2, Q3 1.25ct ; Q4 2.5ct |
|
SPH |
FY12 (Aug) |
23 |
24.0 |
$4.270 |
5.621% |
18.57 |
Interim 7ct ; Final 9ct + Special 8ct |
Aviation Services
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SATS |
FY13 (Mar) |
16.60 |
15.0 |
$3.260 |
4.601% |
19.64 |
Interim 5ct ; Final 6ct + Special 4ct |
|
SIA Engg |
FY13 (Mar) |
24.51 |
22.0 |
$5.070 |
4.339% |
20.69 |
Interim 7ct ; Final 15ct |
|
ST Engg |
FY12 (Dec) |
18.76 |
16.8 |
$4.090 |
4.108% |
21.80 |
Interim 3ct ; Final 4ct + Special 9.8ct |
Note : SATS Special Div is Observed to be Non-Recurring
Transport
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SBSTransit |
FY12 (Dec) |
6.01 |
3.00 |
$1.420 |
2.113% |
23.63 |
Interim 1.35ct ; Final 1.65ct |
|
ComfortDelGro |
FY12 (Dec) |
11.89 |
6.40 |
$1.905 |
3.360% |
16.02 |
Interim 2.9ct ; Final 3.5ct |
|
SMRT |
FY13 (Mar) |
5.5 |
2.50 |
$1.430 |
1.748% |
26.00 |
Interim 1.5ct ; Final 1.0ct |
TELCO
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SingTel |
FY13 (Mar) |
22.02 |
16.8 |
$3.750 |
4.480% |
17.03 |
Interim 6.8ct ; Final 10ct |
|
M1 |
FY12 (Dec) |
16.1 |
14.6 |
$3.140 |
4.650% |
19.50 |
Interim 6.6ct ; Final 6.3ct + Special 1.7ct |
|
StarHub |
FY12 (Dec) |
20.93 |
20 |
$4.010 |
4.988% |
19.16 |
Q1 5ct ; Q2 5ct ; Q3 5ct ; Q4 5ct |
Funds / Infrastructure
|
Stock |
Period |
DPS cts |
Mkt |
Yield |
NAV |
Div Breakdown |
|
SPAus |
2H – Mar13 |
A4.1 (Gross) |
$1.460 |
6.796% |
A$0.91 |
1H13 A4.1ct ; 2H13 A4.1ct |
|
MIIF |
FY13 – Guidance |
1.90 |
$0.180 |
10.556% |
? |
1H12 2.75ct ; 2H12 2.75ct + 3ct (Special) |
* SPAus DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.2101) fm Yahoo
NOTES :
- Mkt Price is as on 31-May-13
- MIIF : FY13 Guidance 1H13 (Jun) –0.7ct ; 2H13 (Dec) – 1.2ct (Final) ; APTT IPO Entitlement / 1000 MIIF Shares (Estimate) = 457 APTT Shares or $443.29
- SPAus : 2H13 (Mar13) – A4.1ct = A1.367ct (Franked) + A2.649ct (Interest) + A0.084ct (Capital Returns) ; 1H13 (Sep12) – A4.1ct = A1.367ct (Franked) + A2.467ct (Interest) + A0.266ct (Capital Returns)
- SPAus : FY14 Guidance = A8.36ct
- SATSvcs : 2H13 (Mar13) – Final 6ct + Special 4ct ; 1H13 (Sep12) – Interim 5ct
- SingTel : 2H13 (Mar) – Final 10ct ; 1H13 (Sep12) – Interim 6.8ct ; Div Policy – 60% to 75% of Underlying Net Profit
- SIAEC : Q413 (Mar13) – Final 15ct ; Q213 (Sep12) – Interim 7ct
- StarHub : Q113 (Mar) – 5ct
- SingPost : Q413 (Mar13) – 2.5ct ; Q313 (Dec12) – 1.25ct ; Q213 (Sep12) – 1.25ct ; Q113 (Jun12) – 1.25ct
- SMRT : Q413 (Mar13) – Final 1.0ct ; Q213 (Sep12) – Interim 1.5ct
- SPH : 1H13 (Feb) – Interim = 7ct
- HLFin : 1H12 (Jun) – 4ct ; 2H12 (Dec) – 8ct (Final)
- ST Engg : 1H12 (Jun) – 3ct ; 2H12 (Dec) – 4ct (Final) + 9.8ct (Special)
- ComfortDelgro : Q412 (Dec) – 3.5ct ; Q212 (Jun) – 2.9ct
- StarHub : FY13 Div Guidance – 5ct/Q
- SBSTransit : Q212 (Jun) – 1.35ct ; Q412 (Dec) – 1.65ct
- M1 : 2H12 (Dec) – Final 6.3ct + Special 1.7ct ; 1H12 (Jun) – Interim 6.6ct