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
- We cut FY21F core EPS by 7.1% to factor in a bigger hit from Covid-19. Target Price kept at S$3.40 after rolling forward the DCF-base year and updating for higher consensus fair value for Bharti.
- See SingTel Share Price; SingTel Target Price; SingTel Analyst Reports; SingTel Dividend History; SingTel Announcements; SingTel Latest News.
- After three years of declines, we see earnings recovery from FY21F as a potential re-rating catalyst and decent 4.7-6.2% yields p.a. in FY21-23F (75% payout).
- SingTel's FY21F EV/OpFCF of 15.7x is at a 5% premium to the ASEAN telco average and roughly in line with its 12-year mean.
- Downside risk: price wars in its markets.
FOONG Choong Chen
CGS-CIMB Research
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Sherman LAM Hsien Jin
CGS-CIMB Research
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https://www.cgs-cimb.com
2020-05-29
SGX Stock
Analyst Report
3.400
SAME
3.400
