SINGTEL (SGX:Z74)
SingTel 2QFY20 Forecast - Bharti To Drag On Earnings
- SingTel's Core net profit could be S$540m-560m in 2QFY3/20F (-22 to -25% y-o-y). This is largely in line with our FY20F forecast but below Bloomberg consensus’.
- Singapore, Optus and Bharti earnings contributions may fall y-o-y; better contribution from other associates expected.
- Maintain ADD. Our SOP-based target price remains at S$3.60.
SingTel's 2QFY3/20F core net profit likely fell y-o-y and q-o-q on Bharti losses
- SINGTEL (SGX:Z74)’s 2QFY3/20F results will be released on 15 Nov. See SingTel Announcements.
- We expect S$540m-560m core net profit, implying 22-25% y-o-y decline (-3 to -6% q-o-q), led by lower Bharti, Singapore and Optus earnings, partly offset by improved contributions from other associates. This would be broadly in line, with 1HFY20 at 45-46% of our FY20F forecast, but miss Bloomberg consensus’ estimates (38-39%).
- We see steady 1H20F DPS of 6.8 Scts (1H19: 6.8 Scts), as SingTel has committed to 17.5 Scts DPS for FY20. See SingTel Dividend History.
Singapore: Earnings may be weighed by Enterprise
- We expect SingTel's Singapore 2QFY20F core net profit to slide 10-15% y-o-y (-7 to -11% q-o-q). Consumer EBITDA may be stable y-o-y (-4 to -6% q-o-q) as better margin (from cost control) offsets lower service revenue (-6 to -8% y-o-y) led by the continued decline in mobile.
- Enterprise EBITDA could fall 5-7% y-o-y (-4 to -6% q-o-q) on lower revenue (price erosion on contract renewals) and margins.
Optus: Growth to be hampered by weaker Consumer and Enterprise
- We project Optus to post 28-30% y-o-y lower (-8 to -10% q-o-q) core net profit. Consumer EBITDA may rise 8-10% y-o-y (-2 to -4% q-o-q), driven by higher fixed revenue. Enterprise EBITDA may drop 33-35% y-o-y (flat q-o-q), as its ICT business continues to be challenged by lower voice usage, price erosions and weaker demand from the government and financial sectors.
- Optus’s contribution to group net profit would also be shaved by the 5.8% y-o-y depreciation of the Australian dollar vs. Singapore dollar.
Associate earnings likely fell y-o-y due to Bharti; may be up q-o-q
- Associate contributions in S$ terms could fall 23-27% y-o-y, mainly owing to share of wider Bharti losses at S$140m-160m (2QFY19: -S$6m), based on Bloomberg consensus forecast. This would be partly cushioned by higher earnings at AIS, Globe, Intouch and Telkomsel, and the positive effects from a weaker S$ vs. IDR (-3.9%), THB (-7.4%), PHP (-3.9%).
- Q-o-q, associate earnings may climb 1-5%, due to share of higher profits from AIS, Telkomsel, Globe and Intouch, partly offset by share of bigger losses at Bharti.
Maintain Add with an unchanged SOP-based target price of S$3.60
- We maintain our ADD rating and SOP-based target price of S$3.60 for SingTel. See SingTel Share Price; SingTel Target Price.
- It trades at a FY3/21F EV/OpFCF of 15.7x, which is at a 9% premium over the ASEAN telco average, supported by decent yields of c.5.2% p.a.
- Potential re-rating catalyst: earnings recovery from 2HFY20F.
- Downside risk: more intense competition in Australia, India and Singapore.
FOONG Choong Chen CFA
CGS-CIMB Research
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https://www.cgs-cimb.com
2019-11-08
SGX Stock
Analyst Report
3.600
SAME
3.600
