SINGTEL (SGX:Z74)
SingTel - Some Bright Spots
- SingTel (SGX:Z74)'s 3QFY21 (Oct 2020 to Dec 2020) revenue and EBITDA met expectation, with 9M21 numbers at 78%/70% of our FY21e forecasts. EBITDA declined 14% y-o-y to S$1bn. Singapore consumers were its weakest link, with mobile ARPU down 23% y-o-y. See SingTel's announcements.
- After-tax exceptional gains were S$116mn, from Bharti Infratel’s merger (S$72mn) and Telkomsel’s sale of towers (S$60mn).
- Australia still grappling with high costs. 3Q21 EBIT declined 29% y-o-y to S$36mn, excluding NBN. This was despite A$ appreciation of 5.7%.
- Underlying weakness in Singapore consumer from loss of roaming revenue and cost burden in Australian could persist. However, there were some bright spots, including stable mobile revenue in Australia, resilient enterprise operations and Bharti’s continued turnaround.
The Positives
Enterprise earnings resilient.
- SingTel's 3Q21 EBITDA at group enterprise was flat y-o-y. This was commendable, given macro weakness. Demand was driven by system infrastructure services, cloud and maintenance projects led by NCS and Australia Enterprise. NCS bookings in 3Q21 were S$809mn from public service, financial and commercial.
- 1H21 bookings for the whole enterprise division had only totalled S$755mn.
Australia consumer stable.
- Revenue from Australia consumers was up 5.4% y-o-y to S$4.16bn, ex-NBN. SingTel’s strength in Australia came from mobile revenue, which was flat y-o-y at A$1.5bn. Despite a 5% y-o-y fall in mobile subscribers, blended ARPU managed to creep up 3% to A$30. A 41% y-o-y surge in data usage to 17GB per month likely helped.
Turnaround at Bharti continued.
- Net loss at Bharti shrank 95% y-o-y to S$4mn. Higher mobile ARPUs and strong 4G additions were behind this.
The Negatives
Singapore consumer still contracting.
- SingTel's roaming revenue from the Singapore consumer continued to recede. Revenue contracted 11% y-o-y while postpaid ARPU collapsed 26% y-o-y. EBITDA was down 22% y-o-y.
- Excluding S$13mn from the Job Support Scheme, EBITDA contracted 28% y-o-y to S$141mn.
High fixed costs in Australia.
- Australia’s 3QFY21 EBIT was down 29% y-o-y to S$36mn, excluding NBN. We believe high fixed costs from its on-net broadband business continued to weigh on it. EBITDA fared better with an increase of 4.4%, excluding NBN.
Outlook
- SingTel remains in the grip of roaming losses, high costs in Australia and competition in Indonesian mobile. That said, it had some bright spots in 3QFY21, such as its enterprise resilience, mobile revenue stability in Australia and Bharti’s recovery.
- Management does not provide analysts’ briefings for quarterly business updates.
Maintain NEUTRAL with unchanged target price of S$2.44
- We keep our SingTel's target price and FY21e earnings largely unchanged. We continue to value SingTel’s core Singapore and Australia businesses at 6x EV/EBITDA and mark its associates to market with a 20% discount to account for their share price variability.
- See SingTel Share Price; SingTel Target Price; SingTel Analyst Reports; SingTel Dividend History; SingTel Announcements; SingTel Latest News.
Paul Chew
Phillip Securities Research
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https://www.stocksbnb.com/
2021-02-15
SGX Stock
Analyst Report
2.440
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2.440
