SingTel - Maybank Kim Eng 2019-02-14: Lower Guidance Likely Priced In

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

SingTel - Lower Guidance Likely Priced In

In line with MKE, below consensus; maintain HOLD

Weaker margins y-o-y and q-o-q

  • SingTel's 3QFY19 revenue growth of 8% q-o-q and 1% y-o-y to SGD4.62b was largely driven by equipment sales typical of the holiday season and higher-priced smartphones. 9MFY19 revenue forms 74%/77% of MKE/FactSet consensus.
  • Operational EBITDA was down 6% q-o-q and 10% y-o-y, affected by handset subsidies. EBITDA margins were 25.7% vs 26.4% in the prior quarter and 29.0% in the prior year. Refer to the PDF report attached for SingTel’s quarterly results summary. 
  • Nonetheless, 9MFY19 cost reductions of SGD320m were on track with management FY targets. 9MFY19 EBITDA was 75% of MKE’s full-year forecast. Core EPS was down 5% q-o-q and 28% y-o-y, bringing 9MFY19 to 77%/70% of MKE/consensus.

Subdued environment reflected in guidance

  • Management lowered its FY19 guidance given the current competitive and macroeconomic environment. Our forecasts are more or less in line.
  • EBITDA guidance has been cut to “low-single-digit” declines from “stable” against our forecast of a 6.6% drop for FY19E. As such, we make no changes to forecasts.

Competition clouds nearly universal

  • The bulk of SingTel’s SOTP remains weighed down by new-entrant competition, in various stages. Assuming no further escalation, value is in fact emerging in the stock. Refer to the PDF report attached for SOTP valuation details. 
  • The timing of catalysts, however, remains murky.

Luis Hilado Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-02-14
SGX Stock Analyst Report HOLD MAINTAIN HOLD 3.390 SAME 3.390