SingTel's 1QFY22 PATMI in Line With Street; Maintain BUY

• SingTel (SGX:Z74)'s 1QFY22 (Apr 2021 to Jun 2021) core PATMI of S$451m (+31% y-o-y) was broadly in line with MKE/ street estimate, driven by broad-based growth across all business segments. Our P&L forecasts are unchanged but we raised SingTel's SOTP-based target price to S$2.83 after accounting for revised valuation estimates for regional associates.
• SingTel remains our Top Pick within the telco sector. BUY.

Broad-based Recovery

• SingTel's 1QFY22 revenue rose 8% y-o-y to S$3.8b on broad-based growth across all business segments amid improving operating environment as compared to last year. The performance was mainly driven by an improvement in Australia consumer (+8% y-o-y) due to higher postpaid ARPU (+14% y-o-y) as a result of increased penetration of Optus Choice plans.
• Also, the group is seeing robust growth from NCS (+6% y-o-y to S$528m) and rebound in Amobee (+56% to S$236m) with the recovery of advertising spending in the US.
• SingTel's 1QFY22s EBITDA of S$997m (+11% y-o-y) was underpinned by the improvement in Australia. Excluding Optus NBN migration revenue and Job Support Scheme (1QFY22: S$6m, 1QFY21: S$69m), underlying EBITDA would have jump 31% y-o-y. Regional associates’ solid contribution (+38% y-o-y to S$514m) was driven by BHARTI (BHARTI IN)’s turnaround from net loss last year on the back of sustained momentum in India and Africa.

5G Uplift Visible; NCS Is Making Progress

• 5G ARPU is starting to rise NCS remains on track, with digital, cloud, platforms & cybersecurity (+31% y-o-y) making up 45% of its business revenue.

Clearer Outlook With Appealing Dividend From SingTel

• Overall, we are seeing green shoots emerging despite the challenging operating environment. SingTel could see sustained EPS recovery momentum, driven by:
  1. turnaround in BHARTI’s profit;
  2. increase in ARPU from 5G plans; and
  3. return of roaming revenues with the gradual re-opening of travel borders.
• This is coupled further in 2Q-4QFY22E.

Source: Maybank Kim Eng Research - 12 Aug 2021