Singtel - RHB Invest 2017-05-18: 4Q/FY17 Results Flash Note

Singtel - RHB Invest 2017-05-18: 4Q/FY17 Results Flash Note SINGTEL Z74.SI

Singtel - 4Q/FY17 Results Flash Note

  • Singtel released its 4Q/FY17 results this morning. FY17 core earnings formed 98% and 100% of our /consensus estimates respectively, in line with management’s guidance. 
  • Key highlight was the weaker associate showing (Airtel hit by aggressive competition) that offset the growth in mobile data, ICT and digital revenues. 
  • An expected final DPS of 10.7 cent/share (payable in August) brings FY17 DPS to 17.5cents/share. This reflects a payout of 73%, ie at the higher-end of its guidance (60-75%). 
  • Maintain NEUTRAL and SGD4.00 TP (7% upside). 

What's New

  • 4QFY17 (Mar) core earnings were flat (+0.8% % YoY, +2.9% YTD) on the back of a 5.2% rise in revenue (-1.5% YTD, +4% YoY) in EBITDA (-0.3% YTD). This was partly driven by the 6% appreciation of the AUD/SGD YoY (+2.2% YTD). On a constant currency basis, revenue growth would have been 2.1% and EBITDA stable.
  • Singapore mobile service dipped 3% QoQ on seasonality (-2% YTD), ie consistent with its peers on roaming/usage weakness.
  • Postpaid additions were a record 42,000 during the quarter due to promotions, albeit ARPU slipped to SGD67 (-4.3% YoY) with higher take-up of SIM-only plans. Optus’ mobile revenue was flattish QoQ (-3.2% YoY) while ARPUs were stable.
  • Associate contributions fell 3% YoY in 4QFY17 (+5.5% YTD), led by the sharp decline at Airtel (-31% YoY) from aggressive priceled competition following the entry of Reliance Jio (RJIO). The impact was partially mitigated by a strong Telkomsel (+18% YoY, +25% YTD). Excluding Airtel, associate contributions would have been 13% higher for the quarter (+12% YTD).
  • Group digital life (GDL) EBITDA losses narrowed to SGD122m in FY17 (FY16: SGD137m loss) against the robust 19% revenue increase. This was as Amobee scales up further.

No change to our forecast, NEUTRAL rating and SOP-based SGD4.00 TP

  • No change to our forecast, NEUTRAL rating and SOP-based SGD4.00 TP (implied FY18 EV/EBITDA of 12.4x) pending the results call. 
  • The stock remains our preferred exposure to the Singapore telcos under our coverage (SG telcos) as it is the least susceptible to the threat posed by TPG Telecom (fourth entrant with a 70MHz of low and high band spectrum secured at the recent 4G auctions). 
  • Key risks are stronger than expected competition in the Singapore/Australia mobile businesses, forex volatility and higher-than-expected losses from adjacent businesses.

FY18 outlook. 

  • Management’s guidance is for consolidated revenue to grow by mid-single digits with EBITDA growth at a low single digit. 
  • Mobile service revenue for Optus is expected to grow by low single digits, while that of Singapore mobile service revenue is to decline by low single digits. GDL revenue is guided at SGD1.2-1.3bn, with EBITDA losses narrowing further to SGD100m (FY17: SGD122m loss). 
  • We look forward to some clarity with regards to its plan to list NetLink Trust (NLT) to unlock the value of the asset. Singtel is required to pare down its stake in NLT to < 25% by Apr 2018. 

Singapore Research RHB Invest | http://www.rhbinvest.com.sg/ 2017-05-18
RHB Invest SGX Stock Analyst Report NEUTRAL Maintain NEUTRAL 4.000 Same 4.000