Singtel - Maybank Kim Eng 2016-02-15: Deserves safe-haven status

Singtel - Maybank Kim Eng 2016-02-15: Deserves safe-haven status SINGTEL Singapore Telecommunications Z74.SI 

Singapore Telecommunications (ST SP) - Deserves safe-haven status 

3Q16 affirmed resilience, safe-haven status 

  • Singtel reported resilient 3QFY3/16 results, in line with expectations. 
  • Despite a weaker AUD, economic headwinds and losses from newly-acquired Trustwave, revenue, EBITDA and core net profit were maintained. It achieved this by investing in higher-growth markets to drive growth (e.g. 4G network in Australia) and cutting costs where necessary (mainly in the Singapore consumer business). 
  • Full-year guidance was maintained. 
  • Consistent earnings and c.5% dividend yield offer a safe-haven refuge. 
  • BUY with SOTP TP SGD4.40. 

Consistent performance despite headwinds

  • Group revenue rose 1% YoY in 3Q and EBITDA was stable despite an 8% fall in the AUD during the quarter. 
  • Underlying net profit fell 1.5% YoY to SGD955m mainly due to a tax credit in 3Q15 that was not repeated and the recognition of SGD8m in net loss from the Trustwave acquisition in 3Q16. 
  • Adjusted net profit rose 3.5% YoY. 
  • Regional associate contributions rose 5%, mainly from Telkomsel (+2%), AIS (+7%) and NetLink Trust (+85%). 

Enterprise trumped Consumer; GDL loss shrinking 

  • While Singapore consumer revenue shrank on more cautious consumer sentiment, data growth remained intact and EBITDA rose 8% on lower opex. 
  • Strongly-rising 4G subscriptions continued to drive Australian mobile growth in AUD terms. 
  • Enterprise offset the slower consumer business with growth in both Singapore and Australia. 
  • Finally, Digital Life continued to narrow losses, with negative EBITDA down 18% YoY. 
  • Guidance maintained Singtel maintained its guidance for FY03/16. 
  • Group revenue is expected to rise by a mid-single digit and EBITDA to grow by a low-single digit, while Group Digital Life’s projected negative EBITDA remains at SGD150- 180m. 
  • Full-year capex is still expected to be SGD3b, mainly for Australia (SGD1.9b). 9M16 group revenue reached 72% of our full-year forecast, while net profit achieved 74% of full-year forecast.

Swing Factors 


  • No new competitor to take up a new mobile operator licence. The three incumbents keep their spectrum allocations, including bands reserved for fourth telco. 
  • AUD reverses its weakening trend against SGD. Every 1% gain in AUD translates to 0.5% gain in Optus revenue, as Optus accounts for c.55% of group revenue. 


  • May not be able to maintain 70% dividend payouts if it needs to reserve cash to pay for spectrum or network investments, especially if associate dividends flag.

Gregory Yap Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-02-15
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 4.40 Down 4.41