SingTel - CGS-CIMB Research 2021-08-09: 1QFY22 Initial Signs Of Earnings Recovery

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SINGTEL (SGX:Z74)

SingTel - 1QFY22 Initial Signs Of Earnings Recovery

• SingTel's 1QFY22F group EBIT (including regional associates’ PAT) likely rose 2-4% y-o-y (down 1-3% q-o-q) to S$540m-550m, in line with our estimates.
• We see this being driven by stronger associate and Optus Consumer earnings, as well as narrower Digital Life losses y-o-y.
• Reiterate ADD on SingTel with an unchanged SOP-based target price.

SingTel's 1QFY22F earnings likely grew y-o-y, in line with forecast

• SingTel (SGX:Z74) will release its 1QFY22 (April 2021 to June 2021) business performance update on 12 Aug. See SingTel's announcements.
• Based on its associates’ reported results and our estimates for Singapore and Optus, we believe SingTel's 1QFY22F group EBIT (including regional associates’ PAT) rose 2-4% y-o-y to S$540m- 550m, mainly due to better earnings from associates and Optus Consumer, plus narrower Digital Life losses. Q-o-q, we think group EBIT to ease 1-3%. 1QFY22F group EBIT may be broadly in line at 20-21% of our FY22 forecast (Bloomberg consensus: 18- 19%), as we expect associate earnings to improve further in 2Q-4QFY22F.

Singapore earnings may be down on COVID-19 & less JSS credits

• 1QFY22F Singapore Consumer EBIT likely fell 23-29% y-o-y (down 1-8% q-o-q) due to recovery in ICT project delivery.
• Meanwhile, Digital Life LBIT likely narrowed 39- 51% y-o-y (narrowed 26-41% q-o-q) on higher revenue/improved margin.

Optus Consumer to rebound on higher mobile revenue & lower cost

• Despite lower NBN migration to frontline healthcare workers, and opex (onshore care agents and bad debt provisions) related to COVID-19.

Bharti turnaround may have lifted associate earnings y-o-y

• We see SingTel's 1QFY22F associate profits (ex-Singapore, in S$ terms) rising 29-33% y-o-y, on a turnaround in Bharti’s contribution to view.

Reiterate ADD on SingTel

• We maintain our earnings forecasts, pending the release of SingTel’s results.
• See
  • SingTel's Share Price,
  • SingTel's Target Price,
  • SingTel's Analyst Reports,
  • SingTel's Dividend History,
  • SingTel's Announcements,
  • SingTel's Latest News.
• Key re-rating catalysts: FY22F core earnings per share rebound and asset monetisation.
• Current SingTel's share price implies an FY22F EV/EBITDA of just 3.0x for Singtel Singapore and Optus, with decent FY22-24F yields of 4.2-6.3% p.a.
• Downside risk: price wars in its operating markets.

FOONG Choong Chen CGS-CIMB Research | Sherman LAM Hsien Jin CGS-CIMB Research | https://www.cgs-cimb.com 2021-08-09

SGX Stock Analyst Report ADD MAINTAIN ADD 2.900 SAME 2.900