SingTel - Maybank Kim Eng 2018-11-08: Pressure All Over

SINGTEL (SGX:Z74) | SGinvestors.io SINGTEL (SGX:Z74)

SingTel - Pressure All Over

Continued outperformance could be challenging; maintain HOLD

  • SingTel's 1HFY19 core EPS was below consensus estimates at 43% of FY19E vs 51% for MKE.
  • We maintain our Singapore and Australia forecasts but reflect our house’s recent earnings revisions for Bharti and AIS. This lowers our DCF-based SOTP to SGD3.39 and our FY19E-20E core EPS by 4- 5%.
  • Maintain HOLD as the stock’s continued outperformance could be challenging.
  • Prefer its 25% associate, NetLink NBN Trust (SGX:CJLU), in Singapore’s telco space.

Consolidated revenue in line

  • SingTel's 1HFY19 consolidated revenue met MKE/consensus estimates, at 48%/49% of FY19E.
  • Heightened competition in the quarter was reflected in the increased popularity of SIM-only and data-add-on plans that diluted ARPUs. But thanks to Singapore’s healthy postpaid subs growth, non-escalation of hostilities in Australia and cost-management, we maintain our consolidated business forecasts.

Adjustments made for regional associates

  • We incorporate our colleagues’ latest associate forecasts for Bharti, whose results missed expectations. Although unlisted Telkomsel in Indonesia staged a q-o-q rebound from a partial recovery of data-pricing power, third-entrant risks have significantly increased for Globe in the Philippines.
  • Overall, our SOTP and earnings are weighted more to Indonesia at 17% than the Philippines’ 6%.

Proverbial 20,000 foot tanker but all seas are rough

  • Singtel’s geographical diversification and non-wireless earnings base provide some protection against its Singapore wireless and broadband peers. This is reflected in its relative outperformance to the STI over the last one and three months.
  • However, with competition in most of its markets outside Singapore in full swing or rising, we think absolute performance remains challenging.

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/ 2018-11-08
SGX Stock Analyst Report HOLD MAINTAIN HOLD 3.39 DOWN 3.460