SingTel - CGS-CIMB Research 2020-05-29: 4QFY20 In-line But DPS Cut Pre-Emptively

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

SingTel - 4QFY20 In-line But DPS Pre-Emptively

  • SingTel's 4QFY3/20 core net profit (-14.9% y-o-y) was in line with our and consensus forecasts. Plunge in Optus’s profits was offset by higher Singapore earnings.
  • Associate earnings turned the corner with the highest contribution in two years, led mainly by improved performance at Bharti and Telkomsel.
  • Reiterate ADD with an unchanged SOP-based target price of S$3.40.

SingTel's 4QFY3/20 core EPS in line but DPS missed

  • SingTel (SGX:Z74)’s 4QFY3/20 core net profit fell 14.9% y-o-y (+7.7% q-o-q) due to a plunge in Optus profits (-83.9% y-o-y), partly offset by higher earnings from Singapore (+12.3% y-o-y) and associates (+20.2% y-o-y). See SingTel Announcements.
  • SingTel's FY20 core net profit was spot on with our forecast and just 2% below Bloomberg consensus. Final DPS was cut to 5.45 Scts (4QFY19: 10.7 Scts).
  • Full-year DPS of 12.25 Scts (81% payout) missed SingTel’s 17.5 Scts guidance. See SingTel Dividend History.
  • SingTel has not provided FY21 guidance, citing uncertainty over the impact of Covid-19.

Singapore: Boosted by wage credits & healthy ICT revenue growth

  • Consumer EBIT rose 6.4% y-o-y (-12.1% q-o-q) due to lower costs. Service revenue fell 6.9% y-o-y (-6.3% q-o-q), led by mobile (-12.0% y-o-y). Postpaid average revenue per user (ARPU) fell 19.5% y-o-y (-15.4% q-o-q) on lower roaming (Covid-19), voice erosion and amortisation of handset subsidies.
  • Enterprise EBITDA rose 14.7% y-o-y (+4.1% q-o-q) on healthy ICT revenue growth and 4.2% pts y-o-y (+0.7% pt q-o-q) margin gain, partly helped by wage credits. Digital Life’s (DL) LBIT narrowed 7.8% y-o-y (+6.7% q-o-q) to S$32m.

Optus: Lower Consumer & Enterprise earnings

  • Consumer EBIT fell 61.8% y-o-y (-50.5% q-o-q) on lower revenue, higher NBN-related traffic cost and rise in depreciation, while NBN migration revenue was flat.
  • Mobile service revenue eased 5.4% y-o-y (-0.7% q-o-q). Postpaid/prepaid users were flat/fell 3.5% q-o-q due to deactivation of inactive subs, while blended ARPU eased 6.5% y-o-y (stable q-o-q).
  • Enterprise EBITDA fell 58.8% y-o-y (-4.5% q-o-q) on lower revenues and margin.

Associate earnings improved due to Bharti & Telkomsel

  • Y-o-y, 58.3% narrower Bharti losses and 10.6% earnings growth at Telkomsel more than offset lower earnings at AIS/other associates (-7.5%/-27.5%). q-o-q, associate earnings jumped 35.6% as Airtel’s losses narrowed 55.9% while Telkomsel’s/Globe’s earnings rose 13.8%/44.8% to offset lower AIS (-2.8%)/other associates (-13.0%) earnings.

Reiterate ADD; SOP-based target price retained at S$3.40

FOONG Choong Chen CGS-CIMB Research | Sherman LAM Hsien Jin CGS-CIMB Research | https://www.cgs-cimb.com 2020-05-29
SGX Stock Analyst Report ADD MAINTAIN ADD 3.400 SAME 3.400