Singapore Telecommunications Ltd - Bharti shines in earnings and dividends

14 Nov 2022

 

  • 1H23 results were within expectations. Revenue and EBITDA were 48%/46% of our FY23e estimates. A special dividend of 5 cents was announced following the S$2.2bn proceeds from sale of Bharti stake.
  • Underlying earnings rose 2% to S$1bn supported by an 8% growth in associate earnings to S$813mn led by a turnaround in Bharti. There was a large drag in earnings from NCS with EBIT down 49% to S$53mn.
  • We maintain our FY23e forecast largely intact. Our ACCUMULATE and SOTP TP of $3.05 is unchanged. Singtel is transitioning to longer-term growth drivers such as data centres and IT services. Near-term earnings growth will be driven by a rebound in mobile ARPUs in India, Singapore and other associates from roaming and improving economic conditions.

 

 

The Positives

+ Strength in Singapore consumer. Singapore consumer grew EBITDA 10% YoY to S328mn. Mobile enjoyed EBITDA expansion from a 12.6% YoY rise in ARPU as roaming revenue returned with borders re-opening. Roaming is around 60% of pre-pandemic levels. Penetration of roaming has risen as compared to using SIM cards of destination countries. Revenue was impacted by a 21% decline in pay TV to S$74mn due to the cessation of EPL.  

 

+ Turnaround in Bharti is still underway. Bharti earnings spiked more than 3-fold to S$172mn. Improvement in earnings came from the 24% YoY increase in ARPU to Rp190 (S$3.2) and 9% YoY rise in 4G mobile customers to 210.3mn.

 

The Negatives

 

– Still a work in progress for NCS. EBITDA for NCS declined 26% YoY to S$110mn. Part of the weakness was from post-acquisition charges in Australia such as staff retention and earnouts and overall higher staffing cost.

– Losses in GXS Digital bank. The digital bank associate registered a S$27mn loss in 1H23. Expectations are for break even in 2025 rather than 2027. From a banker to everyone strategy, GXS will pivot to selected segment. Loans will be targeted to mobile devices and niche small medium enterprises. The advantage of GXS is the lower customer acquisition cost by embedding GXS into Grab and Singtel apps plus tapping on both customer bases.

– Provisions in Optus. There were two provisions made on Optus – (i) goodwill impairment of S$1bn from higher WACC, lower Australian dollar and weaker economic outlook assumptions; (ii) A$140mn provision for the cyber attack based on independent review, credit monitoring services for impacted customers and replacement of customer documents. It does not include potential class action (no notification so far) and penalties from pending investigations.

About the author

Paul Chew
Head of Research
Phillip Securities Research Pte Ltd

Paul has 20 years of experience as a fund manager and sell-side analyst. During his time as fund manager, he has managed multiple funds and mandates including capital guaranteed, dividend income, renewable energy, single country and regionally focused funds.

He graduated from Monash University and had completed both his Chartered Financial Analyst and Australian CPA programme.

Latest Reports

Join Events & Seminars

Learn best practices and latest market outlook from experts and special guests

Hear & Ask our Experts

Join live weekly market calls

Read Popular News & Reports, Technical Pulses

at www.stocksbnb.com

Subscribe to our YouTube Channel

New video every week

Contact us to Open an Account

Need Assistance? Share your Details and we’ll get back to you

IMPORTANT INFORMATION

This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

This advertisement has not been reviewed by the Monetary Authority of Singapore.  

 

Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com