SingTel - Maybank Research 2022-08-24: Overall Good Results; Stable & Stronger

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

SingTel - Overall Good Results; Stable & Stronger

  • SingTel (SGX:Z74)'s 1QFY23 PATMI of S$628m (+41% y-o-y) is in line with MIBG and consensus expectations, accounting for 25% of full year estimates.
  • Headline growth was lifted by improved operational performance and exceptional gains from Airtel (+144% y-o-y) and dilution of the group’s effective shareholding in Australia Tower Network.

Earnings stayed resilient

  • SingTel’s operating revenue and EBITDA in 1QFY23 fell 5.6% and 2.0% y-o-y, respectively, due to the absence of NBN migration revenue and contributions from Amobee which was classified as a ‘subsidiary held for sale’ in March 2022, coupled with a 4% weakening of the Australian dollar.
  • Conversely, EBIT (before associates’ contributions) rose 5.2% y-o-y as
    1. deconsolidation of Amobee and depreciation charges fell after the sale of ATN towers,
    2. roaming rebound from the broader relaxation of COVID-19 restrictions in Singapore, and
    3. improved mobile performance and satellite equipment sales in Australia.

A confluence of catalysts in FY23

  • We forecast SingTel would deliver 3-year earnings CAGR (FY23-FY25F) of 15%. This reflects monetization of 5G in Singapore and Australia, potential divestment of Trustwave, double-digit NCS growth and regional associates benefitting from economic reopening.
  • A regional data centre is also shaping up as SingTel aims to add another 100MW of capacity within 3-5 years to build a DC portfolio with S$8b valuation.
  • Notably, Optus recently announced legacy price plan hikes of AUD4/month to adjust for inflationary pressure. This effectively lifts ARPU by 7-10% for SingTel’s Australian consumer mobile business. We expect improve mobile service EBIT (+5.6% y-o-y) and EBITDA margin growth (+2.8pp y-o-y) in FY23.

Prospects remain bright

SingTel - Valuation & Recommendation

  • We believe SingTel's FY23 earnings will benefit from the following areas:
    1. Reallocate capital by divestment of assets.
    2. Expansive 5G coverage should spur adoption.
  • Refer to Figure 7 in the report attached below for business update on SingTel's associates including Bharti Airtel, AIS, Telkomsel and Global. Our FY23-25F forecasts for SingTel’s core business are unchanged, but we raise our SOTP-based target price by 4% due to higher valuations for associate businesses.
  • We reiterate BUY on SingTel, which is our top sector pick.

Kelvin Tan Maybank Research | https://www.maybank-ke.com.sg/ 2022-08-24
SGX Stock Analyst Report BUY MAINTAIN BUY 3.15 UP 2.980