What is the news?

SingTel reported 1Q14 underlying profits of S$897 million. Revenue decreased -5.3% y-y, due to lower revenue from Australia. FY14 guidance was revised downward due to expected depreciation of key currencies, including AUD. Excluding this FX impact, management guides business fundamentals remains unchanged and strong. SingTel has changed its presentation to focus on 1) Group Consumer (62% Group’s EBITDA ex-assoc), 2) Group Enterprise (41.5%) and 3) Group Digital Life. (-2.0%)

How do we view

Positively, the improvement in cost management mitigated the decline in revenue, leading to y-y EBITDA margin improvements. For SG Group Consumer, data monetizing continues to gain traction, while residential pay TV showed significant improvements. AU Group Consumer EBITDA increased 4.6% y-y on cost optimizing and similar data monetizing. Management stressed its focus on retaining and maximizing profits from existing customers, instead of growth of customer base. Group Enterprise revenue was lower on weaker business environment, but EBITDA was up 3.1% y-y on cost management.

Investment Actions?

We factor in 1Q14’s earnings. We derive a new Sum-of-theparts (SOTP) target price of S$3.99. SingTel’s dividend yield remains attractive, while the business remains fundamentally strong, and the associates provide growth potential. We therefore maintain our “Accumulate” rating.

Source: PhillipCapital Research - 15 Aug 2013