Singtel’s 2QFY17 revenue fell 2.3% YoY to S$4086m, impacted by the decline in mobile termination rates in Australia, higher mobile service credits from device repayment plans, but partly offset by higher equipment sales. 2QFY17 EBITDA was 4.4% lower at S$1233m due to investments in content and keen competition in Australia.

2QFY17 reported NPAT declined 5.6% YoY S$972m due to exceptional gains recorded by its associates in 2QFY16. Excluding exceptional items, core NPAT came in flat at S$978m.

For 1HFY17, revenue fell 4.8% YoY to S$7994.2m on similar reasons as 2QFY17. However, with an increase in associates post-tax underlying profit contributions of 15%, mainly from Telkomsel, core NPAT rose 3.4% YoY to S$1933m and met 48.8% of the street’s estimates.

Going forward, Singtel expects FY17 consolidated revenue to decline by low single digit while EBITDA to be stable. Capex is expected to remain at S$2.4b on cash basis and group free cashflow to be ~S$1.5b.

Pending more details from the analyst briefing later, and on recent share price weakness, we place both our Hold rating and S$4.26 FV under review for a possible upgrade.

Source: OCBC Research - 10 Nov 2016