Singtel - Maybank Kim Eng 2015-11-13: Demonstrating Capacity for Resilience

Singtel - Maybank Kim Eng 2015-11-13: Demonstrating Capacity for Resilience SINGTEL Singapore Telecommunications Z74.SI 

Singapore Telecommunications (ST SP) - Demonstrating Capacity for Resilience 

  • 2QFY16 in line. Topline hit by weak AUD but bottomline bolstered by associates’ contributions. 
  • Full year guidance maintained despite tweaks to Singapore mobile contributions. 
  • Maintain BUY. SOTP TP trimmed slightly to SGD4.41 (from SGD4.50) on lower Bharti TP. 

What’s New 

  • Singtel reported in line 2QFY3/16 results. 
  • Revenue and EBITDA fell 3% YoY due to a lower AUD (-13%) and IDR (-6%), but rose 5% in constant currencies. However, NP was stable at SGD1.03b due to 4% higher share of associate profits, primarily from a 21% rise in Telkomsel’s SGD contributions in Indonesia and contributions from NetLink Trust. 
  • 1H16 NP accounted for 50% of FY15E. 

What’s Our View 

  • The major premise behind our BUY is intact, mainly mobile growth in Singapore and Australia. 
  • Singapore mobile revenue grew 2% with more upgrades to higher-tier plans. Similarly broadband grew 5% on more upgrades to higher-speed plans. 
  • IDD’s 9% fall is not a concern, in our view, as this reflects customers’ switch from voice to data, where the value is still being captured. The value-capture is intact but merely shifts from one line to another. 
  • Optus is also on track to capitalise on its recent market share gains via major content deals with Netflix and BPL. 
  • Finally, Digital Life is on track to reduce EBITDA losses. 
  • Singtel maintained its full-year guidance. 
  • While Singapore mobile growth was cut from mid to low single-digit, this was again due to customers switching from voice roaming to data roaming. Further, Singtel is able to maintain margins by negotiating lower interconnect rates with overseas operators. 
  • We maintain our BUY call on Singtel, our top telco pick. 
  • SOTP TP is trimmed slightly to SGD4.41 from SGD4.50, mainly on a lower fair value assumption for Bharti Airtel where growth has been interrupted by African currency volatility. Bharti’s contribution to 2Q16 results fell 25% YoY. 
  • No changes to forecasts.

Gregory Yap Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2015-11-13
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 4.41 Down 4.50