Singtel’s 2QFY19 revenue was flat YoY at S$4.3b, but would have increased by 3.9% in constant currency terms. Mobile revenue grew 5.6% YoY, boosted largely by higher equipment sales revenue. However, mobile service revenue declined 7.6% YoY due to a combination of lower voice usage, higher mix of SIM-only plans and price competition.

Operating expenses grew 4.1% YoY (+8.0% in constant currency terms), mainly due to higher equipment sales and digital services, as well as higher content costs partially offset by lower ICT sales. As a result, EBITDA declined 9.6% YoY (-5.8% in constant currency terms) to S$1.1b, comprising 22.3% of our fullyear forecast.

Assuming regional currencies remained stable, the associates’ post-tax underlying profit contributions would have dropped by 18% YoY mainly from Airtel and Telkomsel. We deem this set of results to be broadly under our expectations.

Pending an analyst briefing, we maintain our BUY rating but place our fair value of S$4.08 under review.

Source: OCBC Research - 8 Nov 2018