• Trim FY20F/21F earnings by 5%/3%, bringing us 10%8% below consensus.
• We estimate that SINGTEL (SGX:Z74) may reduce dividend per share to 13-15 Scts in FY21F to maintain its credit rating.
• Maintain HOLD with a lower Target Price of S$3.12.

Outlook Still Challenging, Dividends Unsustainable

• Regional associates’ profit contribution has been a critical factor driving Singtel’s share price, via changes in the holding company (Holdco) discount. After a 10% reduction in the value of SingTel’s core business, Holdco discount hovers at ~13% (vs. 15% historical average) and may widen given
  1. lack of clarity on Bharti Airtel’s path to profitability, and
  2. meager growth from Telkomsel, which is losing revenue share in Indonesia.
• We estimate that SingTel may reduce its dividend per share to 13-15 Scts in FY21F to maintain its credit rating. However, we expect earnings growth to resume in FY21F. See SingTel's dividend history.
• Negatives are mostly priced in, in our view.

Where We Differ: Our Revised FY20F/21F Earnings Forecasts Are 10%/8% Below Consensus

• We factor in
  1. 2% core EBITDA growth in FY20F (4% earlier) vs. management guidance of high single-digit growth due to weak Australian economy and Aussie dollar, and
  2. lower expectations from associates given a longer-than-expected recovery in Bharti’s profitability.

Source: DBS Research - 10 Oct 2019