SINGTEL (SGX:Z74)
SingTel - 1HFY21 Forecast ~ Weakness From Multiple Fronts
- SingTel's 1HFY21F core net profit may have fallen 41-42% y-o-y and 33-34% h-o-h to S$760m-770m, which is in line with our but below consensus forecasts.
- We see weaker earnings from SingTel's Singapore operation, Optus and across all associates, except for Bharti (smaller negative contribution).
- Reiterate ADD on SingTel with an unchanged SOP-based target price.
SingTel's 1HFY21F core net profit likely down y-o-y & h-o-h
- SingTel (SGX:Z74) will release its 1HFY21 (Apr 2020 to Sep 2020) results on 12 Nov before market open. See SingTel's announcements.
- Based on SingTel's associates’ reported results and our estimates for Singapore and Optus, we believe SingTel’s 1HFY21F core net profit may have plunged 41-42% y-o-y to S$760m-770m, mainly due to Optus, Singapore and Telkomsel, partly buffered by improved Bharti losses.
- H-o-h, we think earnings slid 33-34% on weaker Optus, Telkomsel, Singapore and Globe performance.
- Ex-investment income from Airtel Africa in FY20, we think 1HFY21F core net profit fell 31-32% y-o-y and 35-36% h-o-h. SingTel's 1HFY21F core net profit may be largely in line with our FY21F forecast (47-48%) but miss Bloomberg consensus (34-35%).
- SingTel's 1HFY21 reported net profit may also include -S$364m of Bharti-related exceptional items booked in 1Q.
Singapore & Optus earnings hit by COVID-19 & mobile competition
- We estimate SingTel's Singapore’s 1HFY21F core net profit fell 20-23% y-o-y (down 12-14% h-o-h), driven by
- the COVID-19 hit on roaming, prepaid usage, device sales and Digital Life,
- stiff mobile competition,
- ongoing declines in carriage services, and
- enterprise EBITDA margin erosion (lower contract value on renewals), partly buffered by Job Support Scheme credits.
- Meanwhile, we see Optus sliding into 1HFY21F core net loss of S$22m-24m (1H/2HFY20 core net profit: S$238m/167m), led by lower NBN migration fees, mobile revenue (lower roaming, higher mix of SIM-only plans, competition) and enterprise EBITDA y-o-y, coupled with COVID-19 related expenses (onshore care agents, debt provisions from financial hardship relief).
Bharti’s improved performance helped to buffer associate earnings
- We believe SingTel's 1HFY21F associate contribution (in S$ terms) was likely flattish to slightly declining y-o-y, based on reported results. Smaller share of Bharti losses at S$120m-130m (due to mobile subs and ARPU growth; 1HFY20: -S$226m) is offset by lower contributions from Telkomsel (down 12-15% y-o-y on data price cuts and legacy-to-data transition), AIS (COVID-19 and competition) and Globe.
- H-o-h, SingTel's 1HFY21F associate profits likely fell 16-17%, on the back of weaker earnings at Telkomsel and Globe, partly mitigated by smaller share of Bharti losses (2HFY20: -S$134m).
Reiterate ADD on SingTel
- See PDF report attached below for earnings forecast and SOP details. We retain SingTel’s earnings forecasts, pending the release of its results. We value SingTel's associates at S$2.60 per SingTel share. SingTel's FY21F EV/OpFCF of 14.3x is at a 9% discount (-0.8 s.d.) to its 12-year mean, with decent FY21-23F yields of 3.4-6.7% p.a.
- See SingTel Share Price; SingTel Target Price; SingTel Analyst Reports; SingTel Dividend History; SingTel Announcements; SingTel Latest News.
- H-o-h earnings recovery in 2HFY21F and asset monetisation are potential re-rating catalysts.
- Downside risk: price wars in its operating 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
2020-11-09
SGX Stock
Analyst Report
3.100
SAME
3.100
