SingTel - Maybank Kim Eng 2018-08-29: Reflecting New Bharti Forecasts

SingTel - Maybank Kim Eng Research 2018-08-29: Reflecting New Bharti Forecasts SINGTEL SGX:Z74

SingTel - Reflecting New Bharti Forecasts

Further profit pressure; maintain HOLD

  • Following our Bharti Airtel (NR378, Rating: SELL, Target Price: INR320) analyst Neerav Dalal’s earnings downgrade today for ARPU and capex pressures, we reduce our Singtel FY19E/20E/21E core-profit forecasts by 10%/11%/4%.
  • Our SOTP Target Price for SingTel is unchanged, given Bharti’s intact Target Price. HOLD maintained in view of limited near-term catalysts.
  • StarHub (SGX:CC3, Rating: BUY, Target Price: SGD1.96) remains our preferred pick in the Singapore telco space.

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India competition more than offset Africa gains

  • Bharti’s India revenue forecasts have been cut by 17%/19% for FY19E/20E, primarily from a 30% ARPU reduction. The latter outweighs a 3%/4% increase in Neerav’s Africa revenue forecasts. As a result, Bharti is forecast to book losses in FY19E, before recovering profitability in FY20E.
  • Neerav’s DCF Target Price (WACC 10.5%, LTG 3%) for Bharti remains INR320, as he rolls forward his valuation to FY20E.

Mix of market status

  • Singtel’s major markets remain in different states of competition.
    • Environments in Thailand and the Philippines currently favour its wireless revenue, though third-entrant risks exist in the Philippines.
    • India and Indonesia have undergone a heightened phase of competition but some market repair and stabilisation appear underway.
    • Australia has had some respite recently with the possibility of consolidation (see report: SingTel - Relief Rally Thanks to Australia dated 23-Aug-2018).
    • Over in Singapore, while incumbents await a fourth entrant in the December quarter, they have gone through revenue and sentiment pressure from a spate of MVNOs.

Digitisation plans

  • In face of its various challenges, Singtel has outlined its business transformation and evolution (see report: SingTel - Inception dated 13-Jun-2018). It will push for more cost efficiency and digitisation and focus on its Digital Life segment. Scale in its major markets on one hand provides a relatively buttressed position but on the other, makes it more challenging to steer all parts in one positive direction.

Swing Factors 


  • Strong growth in enterprise and Digital Life to economies of scale. 
  • Ebbing competitive heat in India. 
  • Subsidies per smartphone drop. 


  • Wireless margin compression triggered either by TPG in Singapore and / or Australia or pre-emptive strikes by incumbents. These are not likely in consensus forecasts. 
  • Long-term capex for 5G rollout not likely priced in. 
  • Worse-than-expected cannibalisation of wireless voice, SMS and roaming by data. 

Luis Hilado Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2018-08-29
SGX Stock Analyst Report HOLD Maintain HOLD 3.460 Same 3.460