Highlights

SingTel - Look Beyond FY21’s Earnings Trough

Date: 28/05/2021

Source  :  CIMB
Stock  :  SingTel       Price Target  :  2.90      |      Price Call  :  BUY
        Last Price  :  2.57      |      Upside/Downside  :  +0.33 (12.84%)
 


  • SingTel's 2HFY21 core net profit fell 22% y-o-y but FY21 beat our forecast by 8%.
  • Lower Optus, Singapore, Globe & Tsel profits were partly aided by Bharti.
  • We reiterate our ADD call on SingTel with a 6% lower SOP-based target price of S$2.90.

SingTel's 2HFY21 Core EPS Fell 22% Y-o-y; FY21 Beat Our Forecast by 8%

  • SingTel (SGX:Z74)’s 2HFY21 (Oct 2020 to Mar 2021) core net profit fell 22% y-o-y (+7% h-o-h) due to Telkomsel (Tsel), Optus, Globe and Singapore, partly offset by smaller Bharti losses.
  • SingTel's FY21 core net profit slightly beat our forecast by 8% (key variance: smaller-than-expected Bharti losses) but missed Bloomberg consensus by 14%.
  • SingTel's 2HFY21 dividend fell to S$0.024 per share (2HFY20: S$0.0545). FY21 dividend of S$0.075 per share (71% payout) was in line with our estimates.
  • For FY22, SingTel guides for:
    1. regional associates’ dividends at ~S$1.3bn,
    2. capex at ~S$2.4bn (FY21: S$2.1bn) and
    3. 60-80% dividend payout ratio, which is within our expectations (75%).

Singapore Was Still Weak; Optus Turned Around to Profits H-o-h

  • Singapore’s 2HFY21 core net profit fell 31% y-o-y (-25% h-o-h). Consumer EBIT was down 36% y-o-y on weaker Life LBIT to S$46m.
  • Meanwhile, Optus’s 2HFY21 core net profit tanked 83% y-o-y to A$31m but saw a turnaround h-o-h (1HFY21: -A$23m). Consumer EBIT fell 60% y-o-y on lower NBN migration fees and higher traffic cost. Consumer mobile service revenue rose 1% y-o-y, with ARPU up 4%. Enterprise EBITDA grew 44% y-o-y (+15% h-o-h).

Telkomsel/Globe Dragged Associate Earnings; Bharti Improved

  • 2HFY21 associate contribution fell 5% y-o-y. Telkomsel/Globe were the main drag on lower Bharti losses (1HFY21: -S$89m).

New Strategic Direction Offers Hope

  • Key highlights of SingTel’s new strategic direction are:
    1. plans to expand NCS’s focus beyond satellites and fibre networks under its portfolio.

Reiterate ADD With 6% Lower SOP-based Target Price of S$2.90

  • Our SOP-based target price for SingTel is reduced after we cut FY22-23F core earnings per share forecast on lower earnings from Singapore, Bharti (consensus) and Telkomsel (after Telkomsel’s 4Q20 results).
  • Key re-rating catalysts: FY22F core earnings per share rebound and asset monetisation.
  • Current SingTel's share price implies an FY3/22F EV/EBITDA of just 4.5x for SingTel Singapore and Optus, with decent FY22-24F yields of 3.9-5.9% p.a.
  • Downside risk: price wars in its operating markets.

Source: CGS-CIMB Research - 28 May 2021

Share this
Labels: SingTel

Related Stocks

Chart Stock Name Last Change Volume 
SingTel 2.57 -0.03 (1.15%) 23,001,400 

  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
 
 

226  186  216  604 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 Sembcorp Marine 0.11+0.001 
 HSI22600MBeCW.. 0.092+0.008 
 Oceanus^ 0.0180.00 
 Acesian Partners 0.054-0.003 
 HSI21600MBeCW.. 0.184+0.015 
 HSI 20400MBeP.. 0.094+0.002 
 Parkson Retail 0.038+0.002 
 HSI 21000MBeP.. 0.059-0.008 
 SingTel 2.57-0.03 
 Dyna-Mac 0.23+0.01 
PARTNERS & BROKERS