• Core FY18 largely in-line
• Weaker contributions from associates
• FY18 final dividend of 10.7 S-cents

Core FY18 Met 96% of Our FY18 Estimate

Singtel’s FY18 operating revenue grew 4.9% to S$17.5b, largely driven by the Australia Consumer (+3.9%) and Group Digital Life (+100.4%) segments. On weaker EBITDA margin at the Enterprise segment due to higher ICT sales mix, FY18 EBITDA grew by a lower 1.8% to S$5.09b, which is in-line with our expectations as it met 100% of our FY18 forecast.

However, share of associates’ pre-tax profits fell 14.7% to S$2.46b. In addition to adverse currency movements, associates’ contributions were mainly impacted by:

1. Airtel (-60%) due to steep cut in mobile termination rates and disruptive price competition in India,
2. NetLink NBN Trust (-49%) on reduced stake, as well as
3. Telkomsel (-3%) on heightened price competition in Indonesia coupled with higher operating costs.

Consequently, FY18 core NPAT (excluding divestment gain) fell 8.4% to S$3.54b.

Unexciting Outlook Guidance

Looking ahead to FY19, Singtel expects the group’s consolidated revenue to grow by low single digit and EBITDA to be stable. Operating revenue in the core business is expected to grow by low single digit while EBITDA is likely to remain stable.

Mobile service revenue from Singapore is expected to decline by mid-single digit level but is expected to grow by low single digit in Australia. Group ICT revenue is expected to increase by mid-single digit, which includes cyber security revenue that is expected to grow by low-teens.

Operating revenue at Amobee Group is expected to grow by mid-teens and EBITDA is projected to increase. Capex on an accrual basis and cash basis is expected to both be lower at ~S$2.2b. Finally, group free cash flow is guided to be ~S$1.9b, and dividends from regional associates are expected to be around S$1.4b.

Stable Dividend Outlook

Singtel also guided for dividends to be maintained at 17.5 S-cents for FY19 and FY20, and thereafter revert to payout ratio of 60%-75% of its underlying net profit. As we factor in Singtel’s guidance and for further dilution of Enterprise blended margin as ICT sales mix grows, we lower our FV to S$4.10 (prev: S$4.15).

We remain positive on Singtel’s longerterm outlook for its growing exposure in digitalrelated businesses, and entrenched position in the regional mobile markets.

Source: OCBC Research - 18 May 2018