SINGTEL
Z74.SI
Associates save the day
- SingTel’s 1Q16 core net profit grew 1.6% yoy (-5.7% qoq). This was in line at 24% of our FY16 forecast (consensus: 23%).
- Associate earnings rose, led by Telkomsel, AIS and Globe. Optus’s earnings contribution declined due to the 11% yoy weaker Aussie dollar vs. Singapore dollar.
- Singapore profits fell due to higher depreciation and the cessation of fibre rollout/maintenance revenue, but partly cushioned by narrower DL losses.
- We upgrade SingTel from hold to Add with an unchanged SOP-based target price (S$4.30). The share price slumped 11.2% over the past three weeks on the back of general market weakness and now offers 15.0% total return (including 4.5% dividend yield).
- Catalysts are a rebound in regional currencies and earnings improvements at Optus.
S’pore: Stronger consumer EBITDA & smaller DL losses
- SingTel’s 1Q16 revenue rose 4.2% yoy, while EBITDA gained 2.8% yoy. Margins slid 0.4% pts yoy to 31.6%. Excluding exceptionals, consumer EBITDA gained 5.4% yoy due to higher mobile and fixed broadband revenue.
- Enterprise EBITDA fell 3.5% yoy due to the cessation of fibre rollout/maintenance revenue (-0.5% yoy excluding this) since 3Q15. Digital Life’s (DL) negative EBITDA narrowed 16.4% yoy and considerably by 50.2% qoq due to business rationalisation and improved gross margins.
Optus’s mobile business continues to grow
- Optus’s service revenue grew 4.5% yoy in 1Q16, driven by growth at its mobile business (+5.3% yoy). Postpaid net adds stayed healthy at 37k (4Q15: 64k, 1Q15: 4k), with ARPU rising 0.8% yoy to A$59. Prepaid subscribers declined 48k, as Optus focused on improving the quality of new prepaid customers. Prepaid ARPU rose 8.8% yoy to A$28. EBITDA advanced 7.3% yoy, with margins down 1.1% pt to 27.9%.
- Optus’ 4G population coverage rose 4% pts qoq to 90% at end-Jul, with the continued rollout of its new 700MHz network.
Associate earnings tracking in line with our FY16 forecast
- Associate contributions in S$ improved 8.6% yoy, with growth at Telkomsel (+11.6%), AIS (+21.6%) and Globe (+9.6%) but partly offset by Bharti’s higher fair value losses. Qoq, associate earnings eased 0.4% due to lower contributions from Bharti Airtel (higher taxes) and AIS.
- In 1Q16, all regional currencies fell against the S$ qoq (Rs: -2.8%, THB: -3.2%, Php: -1.2%, Rp: -3.8%).
- Overall, 1Q16 associate earnings were in line at 24% of our FY16 forecast.
FOONG Choong Chen CFA | http://research.itradecimb.com/ CIMB Securities 2015-08-13
4.30
Same
4.30
