SingTel - Maybank Kim Eng 2019-05-15: Challenging Times Reflected

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

SingTel - Challenging Times Reflected

FY19 below street. Maintain HOLD.

  • SINGTEL (SGX:Z74)'s FY19 core profit at SGD2.82b (-21% y-o-y; +2% q-o-q) was +2%/-5% vs MKE/consensus.
  • Although we raise operational EBITDA and core profit, on the back of planned cost savings, the upcoming reduced stake in Bharti (to 35% from 40%) slightly lowers our SOTP based Target Price to SGD3.37.
  • The continued competitive wireless environment is likely priced in but immediate catalysts are not evident.
  • In the Singapore telco space, NETLINK NBN TRUST (SGX:CJLU) is our top pick.

Challenge continues

  • Revenues and core profit were in line with MKE but below consensus with wireless competition pressure nearly across the board. The FY19 cost control program of SGD541m helped keep operational EBITDA in line with MKE forecasts and another SGD490m program was unveiled for FY20.
  • Guidance for mid-single digit revenue growth was provided but not the segment breakdown. We assume enterprise/business telco service revenues will drive growth but our revised forecasts call for low single digit growth.

Control what you can

  • However, our FY20E operational EBITDA forecasts are in line with guidance of stability as we take into account cost control. In the current competitive and regulatory environment, revenue drivers are harder to control but costs can be.

Waiting for repair

  • Management indicated India, Indonesia and Thailand wireless may be approaching market repair.
  • The potential risks in Australia may rise again with the regulatory rejection of the TPG-Vodafone merger leading to a new four player wireless market.
  • For Singapore, the commercial launch of TPG and whether it creates further disruption remains to be seen.

Luis Hilado Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-05-15
SGX Stock Analyst Report HOLD MAINTAIN HOLD 3.37 DOWN 3.390