SingTel - Maybank Kim Eng 2021-05-28: Below Expectations, But Brighter Prospects

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

SingTel - Below Expectations, But Brighter Prospects

SingTel's FY21 core profit met MKE’s forecast, maintain BUY

  • SingTel (SGX:Z74)'s FY21 headline profit of S$553.7m (-48% y-o-y) missed MKE/ consensus estimates on the back of exceptional charges of S$1.2b, which includes non-cash impairment charges for investment in Amobee and Trustwave. Excluding the exceptional charges, core profit would have met our forecast but still missed street’s estimate.
  • Our new SOTP-based target price for SingTel is trimmed by 4% to account for thinner EBIT margins and revised estimates by our various analysts covering its associate.
  • Nevertheless, we see SingTel's new strategic direction – while mostly expected – as a positive with a focus on growth in 5G and ICT. ADD to this upside catalysts from a return of roaming revenue as vaccines progress. Maintain BUY.

Revenue in line

  • SingTel's FY21 consolidated revenue of S$15.6b (-5% y-o-y) met MKE/consensus estimates. The decline was driven by a tapering of Optus’ National Broadband Network (NBN) migration revenue, ongoing impact of COVID-19 and continued carriage erosion. EBITDA margin of 23.5% (-3ppt) met MKE/ consensus expectations.
  • The narrower EBITDA margin was driven by higher mix of low margin NBN customers and lower roaming services. EBIT of S$1.1b came in a tad below our estimate on higher-than-expected depreciation. We have cut our earnings per share forecast for SingTel by 8-10% to account for these.

Regional associates continued to be resilient

  • Regional associates’ pre-tax contribution rose 4% to S$1.7b despite challenging operating landscape brought by SingTel has guided for regional associates’ dividends to be at S$1.3b, while capex (inc 5G networks) to be at S$2.4b.

5G and NCS: The new growth drivers for Singtel

Kareen Chan Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-05-28
SGX Stock Analyst Report BUY MAINTAIN BUY 2.81 DOWN 2.880