PATMI in Line With Expectations; Maintain BUY

• SingTel (SGX:Z74)'s 3QFY22 core PATMI of S$1,688m (+37% y-o-y) was broadly in line with street/slightly behind MIBG estimate, driven by the expansion of consumer business across Singapore and Australia. Associates’ pre-tax profits rose (+17% q-o-q, 20% y-o-y) as Airtel demonstrated sustained profit turnaround with strong performance in both India and Africa.

Recovery Proves Challenging

• SingTel's 9MFY22 consolidated group revenue fell to S$3,913m (-7.7% q-o-q) on lower NBN migration revenue and equipment sale while EBITDA rose 6.1% q-o-q.
• Singapore mobile service revenue was stable with more adoption of higher ARPU 5G plans and higher roaming from increased international travel. Though Optus operating revenue fell 11% y-o-y, EBITDA rose steadily on healthy growth (+5.1%) in mobile.
• Group Enterprise operating revenue fell (-3.1% q-o-q, -0.9% y-o-y) attributed to lower usage and pricing pressures in its legacy carriage business.
• NCS’ revenue rose (6.4% q-o-q, 8.3% y-o-y) driven by various growth engines (Digital, Cloud, Platforms and Cyber) which contribute 49% of operating revenue. NCS’ bookings amounted to a strong S$611m with a pipeline of projects in various sectors.

Regional Associates Continue to be Resilient

• Pre-tax contributions from SingTel's regional associates rose (16.4% q-o-q, 19.6% y-o-y) driven by Bharti Airtel (BHARTI IN, Current Price: INR711, BUY, Target price: INR890). Airtel posted Typhoon Odette and weaker consumer spending due to COVID-19.

Capturing Digital Growth

• SingTel's operational revenue should improve further as associate earnings recover from lockdowns and as economic conditions stabilise. Easing border restrictions should after inputting higher valuation for regional associates.

• SingTel remains our Top Pick within the telco sector. Re-iterate BUY call.

Source: Maybank Research - 16 Feb 2022