SINGTEL (SGX:Z74)
SingTel - On Track For a Stronger FY23F; Stay BUY
- SingTel's FY22 core earnings rebounded (+11%) after four consecutive years of decline. The recovery thesis remains intact with the reopened borders fueling a rebound in roaming and mobile revenues.
- SingTel remains our preferred Singapore telco pick (FY22-24F CAGR: 22%) with the capital recycling and strategic business reset as catalysts.
- Our target price for SingTel bakes in a 12% ESG premium, reflecting the exemplary sustainability efforts, which rank amongst the best regionally. Maintain BUY and SOP-based target price of S$3.55 from S$3.37, 32% upside and ~5% yield.
Look beyond the earnings miss.
- SingTel (SGX:Z74)’s FY22F (Apr 2021 to Mar 2022) results fell short of expectations, at 93% of our forecast (consensus: 87%). Relative to ours, the deviation was largely on account of higher tax expense with revenue and EBIT meeting estimates (98-99%).
- Core earnings lifted 11% as higher associate contributions (+19%) and lower financing cost offset higher taxation against a 2% revenue slippage (flat if NBN migration revenue and Job Support Scheme (JSS) credits excluded). q-o-q, core earnings fell 1% from lower EBITDA and revenue seasonality.
- A final dividend of 4.8 cents puts full year dividend at 9.3 cents/share – at the top end of its 60-80% guidance.
Mobile revenue has turned the corner
- Singapore mobile revenue was up 4.4% y-o-y, the third consecutive quarter of increase and +0.5% h-o-h (vs 1HFY22). Singapore consumer EBITDA (excluding JSS) was flat y-o-y in 1HFY22 on tight cost controls (FY22: +1%).
- We see a stronger recovery in the June quarter (1QFY23F) from stronger roaming (roaming traffic was at ~30% of pre-pandemic levels in 4QFY22) and prepaid sales as travel restrictions ease with the full opening of the Malaysia-Singapore borders from 1 Apr.
- Meanwhile, Australia/Optus mobile revenue consumer mobile revenue gained 6.7% year-to-date (2HFY22: +3.8% y-o-y) from higher adoption of the ARPU-accretive Choice plans while EBITDA (ex-NBN) jumped 19% y-o-y.
NCS seeing improving pipelines.
- While pressure from the legacy carriage revenue continued, Optus of ~S$300m in FY23F from the recent acquisitions of Dialog and ARQ in Australia.
- See
- Key risks are competition, execution of its strategic business reset, and weaker-than-expected earnings.
Singapore Research
RHB Securities Research
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https://www.rhbinvest.com.sg/
2022-05-30
SGX Stock
Analyst Report
3.55
UP
3.37
