• SingTel's 2HFY21F core net profit may have dipped 18-19% y-o-y but grown 11-12% h-o-h to S$930m-940m, with FY21 possibly 10-11% ahead of our estimate.
• Lower Optus, Singapore, Globe and Tsel profits to be partly aided by Bharti.
• We reiterate our ADD call with an SOP-based target price of S$3.10.

SingTel's 2HFY21F Core Net Profit Likely Fell Y-o-y But May Have Risen H-o-h

• SingTel (SGX:Z74) will release its 2HFY21 results on 27 May.
• Based on its associates’ reported results and our estimates for Singapore and Optus, we believe SingTel’s 2HFY21F core net profit will come in at S$930m-940m, down 18-19% y-o-y (down 20-21% y-o-y, ex-adjustments for Airtel Africa in 2HFY20). This is mainly due to Telkomsel (Tsel), Optus, Globe and Singapore, partly cushioned by narrower Bharti losses. H-o-h, however, we project core net profit rose 11-12% on improved Bharti and Optus performance.
• SingTel's FY21F core net profit may be slightly ahead (10-11%) of our forecast, due to smaller-than-expected Bharti losses.
• As announced by SingTel on 14 May 2021, its 2HFY21 results are expected to include net exceptional losses of S$839m (FY21: S$1.21bn). We are not too concerned as these are mainly non-cash charges.

Singapore May Still be Weak; Optus Could Stage a Turnaround H-o-h

• We estimate SingTel's Singapore 2HFY21F core net profit was down 24-27% y-o-y (down 16-19% h-o-h), led by the:
  1. negative impact of COVID-19 border closures on Life losses (post-HOOQ deconsolidation from Mar 20).
• Meanwhile, we see Optus’s core net profit plunging 67-68% y-o-y to S$53m-55m, mainly owing to
  1. lower NBN migration fees (as NBN rollout nears completion),
  2. decrease in device sales, and
  3. c) higher NBN-related traffic cost.
• However, this is a turnaround from the S$27m loss in 1HFY21, which we think may be led by increased take-up of its higher-margin Optus Choice postpaid plans, seasonally higher device sales and lower staff cost.

Telkomsel Could be a Drag But Bharti Continues to Improve

• We forecast SingTel's 2HFY21F associate contribution (in S$ terms) to ease 4-5% y-o-y, based on profits to rise 5-7%, stemming from narrower Bharti losses (1HFY21: -S$89m).

Reiterate ADD With Unchanged SOP-based Target Price of S$3.10

• We keep SingTel’s forecasts, ADD rating and target price unchanged.

• Key re-rating catalysts: FY22F core earnings per share rebound and asset monetisation. Current SingTel's share price implies an FY3/22F EV/EBITDA of just 3.8x for SingTel Singapore and Optus, with decent FY21-23f 3.0-6.0% per annum.
• Downside risk: price wars in its operating markets.

Source: CGS-CIMB Research - 26 May 2021