Singtel (ST SP) - DBS Research 2018-02-08: Strong Core EBITDA Momentum Yet To Be Reflected In The Price

Singtel (ST SP) - DBS Vickers 2018-02-08: Strong Core EBITDA Momentum Yet To Be Reflected In The Price SINGTEL Z74.SI

Singtel (ST SP) - Strong Core EBITDA Momentum Yet To Be Reflected In The Price

  • SingTel's 3Q18 underlying net profit of S$898m (-8% y-o-y, -3% q-o-q) was in line with consensus and our estimates.
  • Digital advertising further increased its EBITDA to achieve breakeven at the operating profit level.
  • Excluding associates, EBITDA expanded 6% y-o-y in 3Q18 versus 4.5% in 9M18 reflecting strong momentum.
  • BUY with unchanged Target Price of S$4.30.



What’s New 

  • Singtel’s 3Q18 underlying net profit of S$898m (-8% y-o-y, -3% q-o-q) was in line with consensus and our estimates.
  • The drop in profit was due to its associates’ net profit contribution declining to S$420m (-14% y-o-y, -14% q-o-q) led by Bharti, Telkomsel and Globe and lower stake in Netlink Trust.
  • Australia’s underlying net profit grew to S$248m (+24% yo-y) offsetting weakness in Singapore of S$249m (-7.5% yo-y) and S$35m drop from corporate expenses. Australia’s earnings benefited from the highest ever postpaid handset customer growth achieved this quarter, higher NBN migration payments, and increased equipment sales.

Digital advertising achieved operating profit breakeven.

  • More importantly, digital advertising business increased its EBITDA to S$20m versus S$11m in 2Q18 and achieved positive EBIT (S$9m) for the first time. This was on the back of its revenue growing to S$321m (+17% q-o-q, 128% y-o-y).
  • Overall Group Digital Life registered EBITDA of S$14m (flat q-o-q) due to higher investments in content and operating costs in HOOQ in the ramp up stage.


Too cheap to ignore. 

  • 3Q18 EBITDA (excluding associates) rose 6% y-o-y to S$1293m versus 4.5% y-o-y growth in 9M18, reflecting strong momentum in its core business. However, core FY19F EV/EBITDA is trading at only 5.3x versus 7-10x for its local peers and looks too cheap to us.
  • BUY for 25% upside potential and over 5% yield.




Sachin MITTAL DBS Vickers | http://www.dbsvickers.com/ 2018-02-08
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 4.300 Same 4.300



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