SingTel - Phillip Securities 2022-05-30: Re-Opening & Restructuring Upside

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

SingTel - Re-Opening & Restructuring Upside

  • SingTel (SGX:Z74)'s FY22 revenue met our expectations at 101% of FY22e estimates. EBITDA was 93% of estimates due to lower-than-expected NBN migration earnings.
  • 2H22 EBITDA was down 5% y-o-y, the largest drag from NCS and widening losses in Trustwave. Underlying PAT in 2H22 was up 15% excluding exceptional items, NBN and job support scheme.
  • We lower our FY23e forecast for SingTel by a modest 2% to account for weaker enterprise earnings.

The Positives

Improving earnings in Australia.

  • Mobile service revenue rose 4% y-o-y to A$1.84bn, supported by both ARPU and subscriber growth. Optus mobile plans are gaining traction with customers for their more differentiated offering in terms of 5G speed, on-demand product features and improvement in customer service levels. Total consumer revenue in Australia declined due to a drop in NBN migration revenue (-83% y-o-y) and slower equipment sales (- 25% y-o-y).

Huge reversal in Bharti earnings.

  • The growth in earnings was driven by a 23% rise in ARPU and a 12% increase in 4G subscribers in India. Airtel Africa also delivered a 24% improvement in EBITDA through subscribers (+9%) and ARPU growth (+11%).

The Negative

Sluggish enterprise and NCS earnings.

  • EBITDA fell 4%, dragged down by a 14% drop in fixed voice revenue and 3% fall in leased circuits and broadband. Excluding JSS, NCS recorded a 4% rise in EBITDA. Margins were softer due to a 19% y-o-y rise in staff costs.


  • Key drivers to SingTel's earnings recovery in FY23e are
    • Roaming revenue in Singapore consumer and enterprise;
    • Organic and inorganic growth in NCS;
    • Economic recovery post-lockdown in emerging markets of Thailand, Philippines and Indonesia;
    • Improving ARPU in India and rising data traffic.

Maintain ACCUMULATE with a higher target price of S$3.05 (previously S$2.86)

  • Our SOTP-based target price for SingTel is raised from S$2.86 to $3.05 as we roll over our EV/EBITDA into FY23e and higher associate market valuations. Our SOTP-based valuation is based on 7x EV/EBITDA for Singtel’s core Singapore and Australia businesses, at S$1.15/share. SingTel's associates are marked to market at S$1.90/share after a 20% discount to reflect volatility in their share prices.
  • SingTel's Earnings in FY23e are expected to recover as roaming revenue creeps up and economic conditions improve in emerging countries post lock-down.
  • The targeted monetization of around S$3bn assets will help narrow the valuation discounts for associates, strengthen the balance sheet and improve the capacity to raise dividends. Some of the assets identified for recycling of capital include disposal of Amobee, redevelopment of Comcentre and possibly part disposal of associate stakes.
  • We maintain our ACCUMULATE recommendation on SingTel.
  • See

Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2022-05-30