3QFY3/14 results in line with expectations. Maintain HOLD with DCF-based target price of SGD3.67.

A decent quarter with 4% growth in underlying PATMI despite unfavourable movements in forex.

However, catalysts are lacking and we do not see any scope for a dividend revision.

3QFY3/14 in line with expectations

SingTel’s 3QFY3/14 net profit rose 5.5% YoY but fell 1.5% QoQ to SGD873m. Net of exceptional charges, underlying net profit rose by 4% YoY and 3% QoQ to SGD910m. The exceptional charges of SGD37m included SingTel’s share of Bharti’s exceptional tax charge of SGD17m, its share of Globe’s accelerated depreciation of SGD8m and an investment impairment charge of SGD14m by SingTel’s venture capital arm Innov8. EBITDA margin rose 2ppts to 29.6%, mainly driven by better margins in Australia.

Not altogether bad but not great either

It was a decent quarter for SingTel as it was able to grow its PATMI despite the weakness of the Indonesian rupiah and Australian dollar. Most of the increase in the bottom line came from mobile and pay TV growth in Singapore, higher voice rates for Bharti Airtel (EBIT up a strong 36% YoY even after a 12% fall in the Indian rupee) and strong cost control in Australia. Digital Life losses continued to widen, biting off almost 3% from group EBITDA.

No catalyst in sight, reiterate HOLD

SingTel lowered its guidance for the consumer business as Optus in Australia is still restructuring. Other associates, except Bharti, are struggling to overcome the currency translation impact despite decent results in their home currencies. Further, at 1.0x net debt/EBITDA, there is unlikely to be any room to raise dividends or pay out a special return, unlike M1 or StarHub. Digital Life investments, hence losses, are also expected to continue.

Source: Maybank Kim Eng Research - 14 Feb 2014