SingTel - CGS-CIMB Research 2021-08-12: 1QFY22 Core Net Profit Up 31% Y-o-y; Start Of Earnings Recovery

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SINGTEL (SGX:Z74)

SingTel - 1QFY22 Core Net Profit Up 31% Y-o-y; Start Of Earnings Recovery

• SingTel's 1QFY22 core EPS (+31% y-o-y) was in line at 22% of our FY22F forecast.
• Better earnings at associates, Optus Consumer, Amobee & Group Enterprise.
• Reiterate ADD on SingTel and SOP-based target price.

SingTel's 1QFY22 core net profit in line; up 31% y-o-y

• SingTel (SGX:Z74)’s 1QFY22 (April 2021 to June 2021) core net profit rose 31.1% y-o-y to S$451m, mainly due to stronger associate, Optus Consumer and Group Enterprise earnings coupled with narrower Amobee losses, partly offset by lower Singapore Consumer earnings. See SingTel's announcements.
• SingTel's 1QFY22 core earnings per share (EPS) was at 22% of our FY22F forecast (Bloomberg consensus: 20%), which is largely in line as we see further improvements in associate earnings in 2Q-4QFY22F.

Singapore Consumer down on lower JSS; Enterprise up mildly

• 1QFY22 Singapore turned around to S$5m (1QFY21: - S$12m; 4QFY21: -S$7m) as advertising spend rebounded after major cutbacks last year due to COVID-19.

Optus Consumer earnings rebound on mobile revenue & lower cost

• Optus Consumer revenue fell 2.6% y-o-y (in S$ terms: +7.6% y-o-y, -3.7% q-o-q) due to lower NBN migration revenue. However, the robust 11% mobile service revenue expansion (take-up of Optus Choice plans, more stable competition) and lower COVID-19-related costs led to EBITDA rising 12% y-o-y (+23.4% in S$ terms), as expected.
• Excluding NBN migration revenue, 1Q revenue/EBITDA rose 1.4%/36% y-o-y.

Associate earnings y-o-y recovery led by Bharti’s turnaround

• SingTel's 1QFY22 associate profits (ex-Singapore, in S$ terms) climbed 37.5% y-o-y, the highest in the past 13 quarters (ex-4QFY20). Bharti’s contribution turned around to S$16m (1QFY21: -S$80m) and Globe earnings improved (+14.3% y-o-y). q-o-q, associate earnings rose 9.6% on stronger Telkomsel (+11.4%) and Globe (+19.4%) profits.

Reiterate ADD on SingTel

• We keep our forecasts, target price and rating unchanged for SingTel asset monetisation.
• See
  • SingTel's Share Price,
  • SingTel's Target Price,
  • SingTel's Analyst Reports,
  • SingTel's Dividend History,
  • SingTel's Announcements,
  • SingTel's Latest News.
• The current SingTel's share price implies an FY22F EV/EBITDA of just 2.8x for SingTel Singapore and Optus, with decent FY22-24F yields of 4.1-6.3% 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 2021-08-12

SGX Stock Analyst Report ADD MAINTAIN ADD 2.900 SAME 2.900