SINGTEL (SGX:Z74)
SingTel's 1H22 Results - Australia & India Mobile The Outperformers
- SingTel (SGX:Z74)'s 1H22 EBITDA / PATMI met our expectations at 48%/47% of FY22e estimates.
- Australia consumer EBITDA rebounded 28% y-o-y in 1H22 to A$918mil (excluding NBN). Mobile service revenue expanded almost 10% to A$1.84bn, supported by a 12% rise in ARPU.
- SingTel's interim dividend was cut for the 2nd consecutive year to S$0.045 (1H21: S$0.051, 1H20: S$0.068). Dividend guidance is 60%-80% payout of underlying net profit.
- Our FY22e forecast is unchanged. Operationally, we expect earnings to further expand in 2H22. Associate earnings will recover as lockdowns ease and economic conditions improve. Border re-openings will also support Singapore and Australia consumer divisions. We maintain our ACCUMULATE recommendation on SingTel. Our SOTP-based target price is raised to S$2.86 from S$2.52 with higher associate market valuations.
The Positives
Resurgent Australia mobile.
- Mobile service revenue expanded almost 10% to A$1.84bn. Blended ARPU increased 12.6% to A$32, close to pre-pandemic levels. Optus 5G plans have been capturing market share in SME and consumer segments.
Bharti turnaround is intact.
- Despite the pandemic, Bharti Airtel (BHARTI IN) enjoyed a major S$138mil y-o-y turnaround in 1H22 net profit. Earnings growth is driven by a 10% increase in subscribers and a 7% y-o-y rise in ARPU. Following the rights issue in October, SingTel’s stake in Bharti nudged up from 31.72% to 31.76%.
The Negative
Cut in interim dividends.
- Despite improving earnings, the interim dividend was cut for the 2nd year to S$0.045. 1H22 free cash flow at S$1.7bn was similar to last year. When compared to 1H19, there is a shortfall of S$200mil due to higher capital expenditure needs for 5G. Our FY22e dividend estimation is S$0.09 (or 70% payout).
Outlook
- SingTel's earnings should recover further in 2H22. More economic sensitive associate earnings will rebound as lockdowns ease and economic conditions improve. Singapore and Australia mobile will enjoy a lift in revenues as borders re-open. Improvement will be from higher roaming revenue and equipment and re-contracting sales as shops re-open.
- We are neutral on the disposal of infrastructure assets. It appears more a refinancing exercise unless cost savings or new revenue opportunities are achieved through the disposal.
- In terms of FY22 guidance, SingTel reaffirmed capital expenditure of around S$2.4bn (FY21: S$2.2bn), dividends from associates of at least S$1.3bn (FY21: S$1.3bn) and dividend payout of between 60% and 80% of underlying net profit (FY21: 71%).
Maintain ACCUMULATE with a higher target price of S$2.86, from S$2.52
- Our SOTP-based valuation is based on 6x EV/EBITDA for SingTel’s core Singapore and Australia businesses, at S$0.77/share. Associates are marked to market at S$2.09/share with a 20% discount to reflect volatility in their share prices.
- See
Paul Chew
Phillip Securities Research
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https://www.stocksbnb.com/
2021-11-17
SGX Stock
Analyst Report
2.86
UP
2.520
