Reflecting Bharti Upgrade; Maintain HOLD

• Following an upgraded outlook and Target Price for Bharti, we raise our SINGTEL (SGX:Z74) SOTP-based Target Price by 8% to SGD3.72.
• A return of pricing power to India’s market is a key positive for one of SingTel’s major businesses. This leaves the Singapore wireless market as its remaining major overhang, in our view. We see signs of stability but recovery is another matter.
• Maintain HOLD where the direction of competition in its main markets should determine upside or downside.

Tariff Increases Trump Regulatory Fees and Penalties

• Our India telco specialist, Neerav Dalal, has factored in a full INR342.6b (SGD6.5b) payment for AGR fees and penalties potentially levied against Bharti. Bharti’s short-to-medium-term balance-sheet pressure results in our 2% lower FY20E/21E core-profit forecasts for SingTel.
• Recent industry-wide wireless-tariff increases in India should create positive EBITDA momentum for Bharti that should translate into a 1% increase in SingTel’s FY22E core profit.
• Click 'view full report' button below to view the sum-of-part valuation details of SingTel in the PDF report.

Singapore-market Repair the Missing Link

• Singapore telco management teams remain guarded about the state of wireless competition. q-o-q wireless-revenue has stabilised but expectations of yet more MVNOs flooding the market and TPG’s commercial launch remain hurdles.
• Meanwhile, cashflow pressure from prospective 5G investments without a clear mass-market price recovery remains a risk.

The Right Path

• By nature of its diversified country and business exposure, SingTel’s profits can and have been pulled in several directions. Competition direction in India should provide positive momentum after several quarters of hits. Stability in other parts combined with a more constructive outlook for Singapore would improve the picture, in our view.

Source: Maybank Kim Eng Research - 2 Dec 2019