Simons Trading Research
SingTel - 1HFY21 Some Positives Amid Weak Results
- SingTel's 1HFY21 core net profit fell 36% y-o-y (-27% h-o-h) to S$837m, in line with our forecast but below the consensus number.
- Lower-than-expected share of Bharti losses and 100% interim dividend payout were 1HFY21 positives. EBITDA saw some q-o-q recovery in 2QFY21.
- Reiterate ADD with an unchanged SOP-based target price.
SingTel's 1HFY21 Earnings in Line With Our Estimates But Below Consensus
- SingTel (SGX:Z74)’s 1HFY21 (Jul 2020 ~ Sep 2020) core net profit plunged 36.2% y-o-y (-26.9% h-o-h) to S$837m due to Optus, Singapore and Telkomsel, partly offset by lower losses from Bharti.
- Ex-investment income from Airtel Africa in FY20, 1HFY21 core net profit fell 25.6% y-o-y (-29.3 h-o-h). This was largely in line with our FY21F forecast (52%) but missed Bloomberg consensus (39%).
- SingTel's 1HFY21 DPS fell to 5.1 cents (1HFY20: 6.8 cents, see SingTel's dividend history), but the 100% payout ratio tracks ahead of our FY21F expectation (75%).
- No FY21F earnings guidance but SingTel expects:
- regional associates’ dividend at S$1.3bn, and
- capex at S$2.2bn (Optus: A$1.5bn, rest of the group: S$700m).
- Singtel will review its dividend policy at end-FY21.
Singapore: Hit by COVID-19; Some Recovery Post-circuit Breaker
- SingTel's Singapore 1HFY21 core net profit fell 18.2% y-o-y (-9.0% h-o-h).
- Consumer EBIT declined 21.8% y-o-y as service revenue eased 16.1% y-o-y, on weaker mobile (-22.8% y-o-y) due to COVID-19.
- Enterprise EBITDA fell 7.7% y-o-y due to decline in carriage services and plunge in roaming.
- Digital Life LBIT narrowed 19.9% y-o-y to S$62m due to the deconsolidation of HOOQ.
- In 2QFY21,
- Consumer EBITDA grew 1.6% q-o-q, partially offset by lower Job Support Scheme credits,
- Group Enterprise EBITDA rose 6.5% q-o-q, and
- Digital Life posted an EBITDA of S$3m (1QFY21: S$18m loss).
Optus: Slid into losses on drop in NBN migration fees & COVID-19
- Consumer EBIT fell 76.3% y-o-y on lower NBN migration fees (-26.4% y-o-y) and mobile service revenue (-3.0% y-o-y; ex-COVID-19, up low single-digit on higher ARPU and lower handset subsidies). Enterprise EBITDA rose 1.9% y-o-y (+25.6% h-o-h) on higher revenue.
- Overall, Optus slid into a 1HFY21 core net loss of S$22m (1HFY20: +S$239m). Consumer EBITDA rose 10% q-o-q in 2QFY21 mainly due to lower COVID-19 related costs.
Bharti’s improved performance helped to buffer associate earnings
- SingTel's 1HFY21 associate contribution (in S$ terms) rose 6.4% y-o-y (-9.8% h-o-h) due to a lower-than-expected share of Bharti losses at S$89m (1H/2HFY20: -S$225m/-S$134m), which more than offset lower earnings from Telkomsel (-14.0% y-o-y; owing to competition and voice decline), AIS (-15.2%) and Globe (-9.3%).
Reiterate ADD on SingTel With Unchanged SOP-based Target Price
- We maintain our earnings forecasts, target price and ADD rating post SingTel's 1HFY21 results.
- H-o-h earnings recovery in 2HFY21F and asset monetisation are potential re-rating catalysts.
- Its 14.6x FY21F EV/OpFCF is at a 7% discount (-0.6 s.d.) to its 12-year mean, with decent 3.3-6.5% FY21-23F yields.
- Downside risk: price wars in its operating markets.
Source: CGS-CIMB Research - 12 Nov 2020
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