• SingTel delivered 1HFY22 core earnings of S$983m, a 17% y-o-y growth on the back of improved Optus performance and a turnaround in associate Airtel. Accounting for 43% and 44% of house and street’s estimates, the earnings were below expectations.
• SingTel's management alluded towards recovery thanks to the reopening of economy. First interim dividend of S$0.045 was declared for 1HFY22. We cut FY22 forecast by 6%, accounting for higher depreciation charges. Maintain BUY.

SingTel's 1HFY22 Core Earnings Below Expectations

• SingTel (SGX:Z74) grew 2QFY22 core net profit to S$532m (+8% y-o-y; +18% q-o-q). This brings 1HFY22 core net profit to S$983m (+17$ y-o-y) - below expectations as it accounts for only 43% and 44% of house and street’s full-year estimates.
• Key drivers for SingTel in 1HFY22 include:
  • improved Optus performance alongside a 6% A$ appreciation,
  • higher associate contributions with the turnaround in Airtel, and
  • lower finance expenses.
• The discrepancy on our end stemmed from lower-than-expected revenue trajectory and higher-than-expected depreciation.
• SingTel's 1H22 dividend within expectations. SingTel has declared an interim net dividend of S$0.045/share.

Stock Impact

• Consumer: A nice 1HFY22 for Australia. In Australia, mobile to higher advertising revenue vs last year when customers cut back on advertising dollar due to the pandemic. Consequently, EBITDA was US$5m vs EBITDA loss of US$4m in 1HFY21.

SingTel - Earnings Revision

• We trim SingTel's FY22 net management expects to pay out dividends at the higher end of the 60-80% payout range. Associate earnings are expected to be no trades at its 5-year mean EV/EBITDA of 13x.

• Key re-rating catalysts include:
  • successful monetisation of 5G,
  • faster-than-expected recovery in Optus' consumer and enterprise businesses, and
  • market repair in Singapore.

Source: UOB Kay Hian Research - 12 Nov 2021