SingTel - CGS-CIMB Research 2020-11-12: 1HFY21 Some Positives Amid Weak Results

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

SingTel - 1HFY21 Some Positives Amid Weak Results

  • SingTel's 1HFY21 core net profit fell 36% y-o-y (-27% h-o-h) to S$837m, in line with our forecast but below the consensus number.
  • Lower-than-expected share of Bharti losses and 100% interim dividend payout were 1HFY21 positives. EBITDA saw some q-o-q recovery in 2QFY21.
  • Reiterate ADD with an unchanged SOP-based target price.

SingTel's 1HFY21 earnings in line with our estimates but below consensus

  • SingTel (SGX:Z74)’s 1HFY21 (Jul 2020 ~ Sep 2020) core net profit plunged 36.2% y-o-y (-26.9% h-o-h) to S$837m due to Optus, Singapore and Telkomsel, partly offset by lower losses from Bharti. See SingTel's announcements.
  • Ex-investment income from Airtel Africa in FY20, 1HFY21 core net profit fell 25.6% y-o-y (-29.3 h-o-h). This was largely in line with our FY21F forecast (52%) but missed Bloomberg consensus (39%).
  • SingTel's 1HFY21 DPS fell to 5.1 cents (1HFY20: 6.8 cents, see SingTel's dividend history), but the 100% payout ratio tracks ahead of our FY21F expectation (75%).
  • No FY21F earnings guidance but SingTel expects:
    1. regional associates’ dividend at c.S$1.3bn, and
    2. capex at c.S$2.2bn (Optus: A$1.5bn, rest of the group: S$700m).
  • Singtel will review its dividend policy at end-FY21.

Singapore: Hit by COVID-19; some recovery post-circuit breaker

  • SingTel's Singapore 1HFY21 core net profit fell 18.2% y-o-y (-9.0% h-o-h).
    • Consumer EBIT declined 21.8% y-o-y as service revenue eased 16.1% y-o-y, on weaker mobile (-22.8% y-o-y) due to COVID-19.
    • Enterprise EBITDA fell 7.7% y-o-y due to decline in carriage services and plunge in roaming.
    • Digital Life LBIT narrowed 19.9% y-o-y to S$62m due to the deconsolidation of HOOQ.
  • In 2QFY21,
    1. Consumer EBITDA grew 1.6% q-o-q, partially offset by lower Job Support Scheme credits,
    2. Group Enterprise EBITDA rose 6.5% q-o-q, and
    3. Digital Life posted an EBITDA of S$3m (1QFY21: S$18m loss).

Optus: Slid into losses on drop in NBN migration fees & COVID-19

  • Consumer EBIT fell 76.3% y-o-y on lower NBN migration fees (-26.4% y-o-y) and mobile service revenue (-3.0% y-o-y; ex-COVID-19, up low single-digit on higher ARPU and lower handset subsidies). Enterprise EBITDA rose 1.9% y-o-y (+25.6% h-o-h) on higher revenue.
  • Overall, Optus slid into a 1HFY21 core net loss of S$22m (1HFY20: +S$239m). Consumer EBITDA rose 10% q-o-q in 2QFY21 mainly due to lower COVID-19 related costs.

Bharti’s improved performance helped to buffer associate earnings

  • SingTel's 1HFY21 associate contribution (in S$ terms) rose 6.4% y-o-y (-9.8% h-o-h) due to a lower-than-expected share of Bharti losses at S$89m (1H/2HFY20: -S$225m/-S$134m), which more than offset lower earnings from Telkomsel (-14.0% y-o-y; owing to competition and voice decline), AIS (-15.2%) and Globe (-9.3%).

Reiterate ADD on SingTel with unchanged SOP-based target price.

FOONG Choong Chen CGS-CIMB Research | Sherman LAM Hsien Jin CGS-CIMB Research | https://www.cgs-cimb.com 2020-11-12
SGX Stock Analyst Report ADD MAINTAIN ADD 3.100 SAME 3.100