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.
- SingTel continues to withhold its headline guidance due to the macroeconomic uncertainties but guided dividends from regional associates will be c.S$1.3bn with group capex (including 5G) at S$2.2bn (S$1.5bn Optus and S$0.7m for the rest of the group).
- Dividend is to be capped at FY21 core earnings (FY20: 81%), which implies absolute DPS for the year is likely to decline.
- Our forecasts are unchanged.
- See SingTel Share Price; SingTel Target Price; SingTel Analyst Reports; SingTel Dividend History; SingTel Announcements; SingTel Latest News.
Singapore Research
RHB Securities Research
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https://www.rhbinvest.com.sg/
2020-11-13
SGX Stock
Analyst Report
3.100
SAME
3.100
