What is the news?

SingTel reported 3Q13 underlying profits of S$874 million, decreasing 2.3% y-y. Management maintained their guidance on the EBITDA and Capex for the various segments. In Singapore, revenue increased marginally 1.3%, due to higher Mobile, IPTV, and Equipment revenue, mitigated by lower International and national telephone revenue. In Australia, revenue decreased 8.1%, largely due to lower mobile revenue attributable to the decline in mobile termination rate and introduction of service credits. AIS and Telkomsel post healthy results, while Bharti’s pre-tax contributions continue to decline.

How do we view

3Q13’s earnings were below our expectations on weaker revenue from Optus, and lower contributions from associates. Positives from this round of results include an increase in data monetizing, indications of lower IPTV content cost in Singapore, effective cost management in Australia, and potentially better performances for Globe and Bharti moving forward. Optus would however require continued higher capex, and may incur high spectrum costs.

Investment Actions?

We factor in 3Q13’s earnings, and improved q-q valuation of the associates. We derive a new Sum-of-the-parts (SOTP) target price of S$3.31, and maintain our "Neutral" call.

Source: PhillipCapital Research - 15 Feb 2013