SINGTEL (SGX:Z74)
SingTel's 3QFY21 Earnings - Down (Y-o-y) But Certainly Not Out
- SingTel's 3QFY21 group EBIT (including regional associates’ PAT) fell 22% y-o-y (-3% q-o-q) to S$622m, slightly above our forecasts.
- Earnings were weaker y-o-y from Singapore, Optus and Telkomsel, partly mitigated by a smaller negative contribution from Bharti.
- Reiterate ADD, with an unchanged SOP-based target price of S$3.10.
SingTel's 3QFY21 group EBIT slightly ahead of our forecast
- SingTel (SGX:Z74)’s 3QFY21 (Oct 2020 to Dec 2020) group EBIT (including regional associates’ PAT) fell 22.4% y-o-y to S$622m, mainly due to Singapore, Optus and Telkomsel, partly buffered by smaller losses from Bharti and Group Digital Life. See SingTel's announcements.
- Q-o-q, the gauge slid 3.4% on weaker Singapore Consumer, Group Enterprise and Bharti performance, partially offset by an improvement at Optus.
- As per our preview in report SingTel - CGS-CIMB Research 2021-02-09: Bharti Recovery To Mitigate Challenging 3Q, SingTel's 9MFY21 group EBIT was slightly ahead at 83% of our FY21F forecast, on narrower-than-expected Bharti losses.
COVID-19 hit SG Consumer but Group Enterprise was fairly resilient
- SingTel's Singapore Consumer EBIT fell 37.9% y-o-y due to the adverse impact of COVID-19 border closures (on roaming and tourist/migrant workers SIM card sales) and stiff mobile competition, and fell 15.5% q-o-q, partly due to lower Job Support Scheme (JSS) credits of S$3m (2QFY21: S$6m).
- Despite business disruptions and weaker macroeconomic conditions, Group Enterprise was relatively resilient with EBIT easing a modest 4.4% y-o-y and 3.5% q-o-q (fewer JSS credits of S$8m vs S$15m in 2QFY21). Strong ICT revenue growth of 7.9% y-o-y helped mitigate the decline in the carriage business, while earnings were also buffered by cost management.
- Meanwhile, Digital Life LBIT narrowed 60.0% y-o-y (narrowed 42.9% q-o-q), due to the deconsolidation of HOOQ from 1 Mar 2020.
Optus down on lower NBN migration fees; Bharti losses narrowed
- 3QFY21 Optus Consumer EBIT plunged 59.7% y-o-y due to:
- lower NBN migration fees of A$72m (3QFY20: A$233m), as expected, as the NBN rollout nears completion, and
- higher NBN-related traffic cost.
- On a positive note, mobile service revenue was stable y-o-y (+1.7% q-o-q) with higher penetration of Optus Choice postpaid plans (higher margin) offsetting lower roaming and prepaid (tourist/foreign students) revenue due to COVID-19.
- Q-o-q, Consumer EBIT rose 33.1% on seasonally higher equipment sales. 3QFY21 associate profits (ex-Singapore, in S$ terms) rose 8.1% y-o-y due to a smaller S$28m share of Bharti losses (3QFY20: -S$93m) as its mobile subs and ARPU grew further, partly offset by lower Telkomsel profits (-17.8% y-o-y). q-o-q, associate profits eased 4.9% on a wider share of Bharti losses (2QFY21 was boosted by one-off gains), partly aided by higher contribution from AIS (+10.4%) and Telkomsel (+2.3%).
Reiterate ADD with unchanged SOP-based Target price of S$3.10
- Details of SOP-based target price computation available in report attached below.
- Key re-rating catalysts: FY22F core earnings per share rebound and asset monetisation.
- The current SingTel's share price implies an FY3/22F EV/EBITDA of just 3.1x for SingTel Singapore and Optus, with decent 3.1-6.0% FY21-23F yields. See SingTel's dividend history.
- Downside risk: price wars in its markets.
- See SingTel Share Price; SingTel Target Price; SingTel Analyst Reports; SingTel Dividend History; SingTel Announcements; SingTel Latest News.
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
2021-02-10
SGX Stock
Analyst Report
3.100
SAME
3.100
