SingTel - RHB Invest 2020-11-13: Veering Off Lows; Keep BUY

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

SingTel - Veering Off Lows; Keep BUY

  • SingTel's 1HFY21 (Mar) results were a consensus miss again, although in line with our estimate. While near-term challenges remain, we expect stronger earnings recovery from 4QFY21.
  • At current levels, the valuation of its regional associate has usurped SingTel’s market capitalisation with the core mobile business going for free.
  • Stay BUY and SOP-based target price of S$3.10, 39% upside and c.5% yield.
  • Competition and weaker-than-expected earnings are downside risks, with monetisation of non-core assets as the key upside risk.

SingTel's core NPAT fell 36% in 1HFY21

  • SingTel (SGX:Z74)'s core NPAT fell 36% in 1HFY21, exacerbated by the pandemic but jumped 47% q-o-q as the progressive resumption in economic activities shored up revenue/EBITDA. The digital life business also turned in positive EBITDA. Excluding the Job Support Scheme (JSS) credits (2QFY21: S$25m, 1HFY21: S$94m), EBITDA advanced 18% q-o-q (-23% year-to-date).
  • We deem the results as being broadly in line (44% of our estimate), albeit, a consensus miss (38%).
  • A 5.1 cents dividend was declared (100% payout).

Sequential MSR recovery but not roaming.

  • Singapore and Australian (Optus) mobile revenue recovered (+1.1%/+4.3% q-o-q AUD terms) after population restrictions were eased. Still, 1HFY21 group consumer revenue and EBITDA declined 12% and 26% from sharply lower roaming, usage and prepaid revenues due to travel restrictions and handset sales. Higher take-up of SIM-only and digital plans (GOMO) supported the Singapore postpaid base as ARPU stayed flat on quarter.
  • Optus’ subs base fell for the third quarter in a row. Management sees the acquisition of amaysim (largest Australian Mobile Virtual Network Operator (MVNO)) as largely value accretive with the economic recession set to further spur the MVNO market.
  • Enterprise benefiting from pandemic spending, with revenue and EBITDA up 7% sequentially, thanks to higher infrastructure services demand, cloud and data centre revenues with accelerated digitalisation initiatives and telecommuting.

Associates up 37% QoQ led by Airtel (BHARTI IN).

  • Stronger contribution from Airtel (ARPU uplift and 4G take-up) more than offset the declines in Telkomsel (TLKM IJ, BUY, Target price: IDR4,000), Advanced Info Service (ADVANC TB, BUY, Target price: THB220.00) and Globe (GLO PM) from competition and the lockdown.

Limited guidance, full-year DPS set to decline.

Singapore Research RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-11-13
SGX Stock Analyst Report BUY MAINTAIN BUY 3.100 SAME 3.100