Singtel’s 1HFY21 underlying NPAT was soft at S$837m (-36% YoY), constituting ~38% of consensus full-year forecast (no quarterly split provided). However, there appears to be improving operating trends with 2QFY21 revenue of S$3.9b (-7% YoY) notching a QoQ improvement of 10%.

Singtel is recommending an interim DPS of 5.1 S-cents, representing a ~100% payout ratio on 1HFY21 underlying net profit. Total dividends for FY21 are not expected to exceed the group’s underlying net profit.

In Australia, mobile subs fell QoQ due largely to the drop in prepaid subs. Management noted that this was in part a result of subdued demand from inbound immigrants and tourists, given the lockdown restrictions.

In Singapore consumer, management noted the more encouraging 2Q operating trends following the movement restrictions in 1Q. Going into 3Q, management noted positive trends from consumption patterns, though roaming revenue is expected to remain subdued on the back of travel restrictions.

On the topic of asset monetization, the review of the potential sale of Optus’s towers is work-in-progress, while the group will continue to review their non-core assets.

Separately, management believes that 5G should be viewed as a platform to provide consumers and enterprises with applications that can be built on top of the network to take advantage of the high capacity and low latency.

Following adjustments, our FV drops from S$3.08 to S$2.85. Maintain BUY.

Source: OCBC Research - 16 Nov 2020