• Strong growth in 3Q net profits at 11.2%y-y, above consensus estimates by 7.7%.
• Benefit from strong gains across its regional mobile associates.
• Maintain Accumulate with target price of S$4.42, implying FY15e PE of 18.4x

What is the news?

3Q15 results reported strong earnings growth at 6.7%y-y, benefiting from gains from its regional associates. YTD reported net profits up 3.2% y-y while underlying net profits gain 5.2%y-y.

Core 3Q15 EBITDA declined 2.8%y-y mainly due to lower Enterprise EBITDA from Optus.

Maintain guidance on low single digit growth in EBITDA.

How do we view this?

We continue to be positive on Singtel over improved performance in Optus and strong performance outlook from its associates. Optus benefit from the strong additions of 100,000 mobile customers (postpaid & prepaid) and increase in 4G mobile customers in this quarter. We continue to expect continued strong performance from the regional associates on higher customer base and mobile data revenue as well as healthy gains in the Singapore business.

Key risk factors

• Currency headwinds from weakening regional currencies against SGD.
• Intensifying competition faced by its core enterprise business.

Investment Actions

Maintain Accumulate with revised target price of S$4.42, in view of positive outlook and strong growth from its regional mobile associates ahead.

Source: Phillip Securities Research - 13 Feb 2015