Towards Financial Freedom
SingTel - 1QFY14 In Line With Guidance Moderated
SingTel's 1QFY14 results were broadly in line. The seasonal recovery in Singapore's mobile business was insufficient to offset the structural weakness in Australia amid the weak AUD. The improved showing from associates helped mitigate earnings dilution from the nascent digital life (GDL) business. We make no change to our forecast and NEUTRAL call pending the results call today. TP (previously SGD3.70) is under review.
- New disclosure mars comparisons, but results in line. SingTel's 1QFY14 core earnings made up 53% of our forecast and 52% of consensus estimates. Core profit improved 7% y-o-y (+16.4% q-o-q) against a revenue contraction of 5.3%, weighed down by the strength of the SGD against the AUD, INR and IDR. Note that like-for-like comparisons of its operational metrics are distorted by the change in its financial disclosure (now based on business lines).
- Group consumer (GC) and enterprise (GE). Overall group revenue fell 5% y-o-y (-4.2% q-o-q), dragged down by the 6% decline in GC revenue while GE sales dipped 4%. The stronger Singapore mobile performance (+4%) was more than offset by weaker contribution from Optus (-6%) while GC EBITDA improved 20% from lower handset subsidy and the earlier workforce and distribution revamp in Australia.
- GDL business in start-up phase. The emerging digital investments (mainly Amobee) saw revenue surging 50% y-o-y (+3.4% q-o-q), albeit posting a wider EBITDA loss of SGD32m vs SGD33m in 4QFY13 and SGD24m in 1QFY13, on higher staff and administration costs.
- Associates dialed in stronger numbers. The improvement in the operating environment in India and steady competition in Indonesia have contributed to the higher share of profits from Bharti and Telkomsel while AIS gained from subscribers switching to the new 2.1GHz 3G network.
- Guidance moderated. Management has maintained its guidance of: i) Singapore revenue to increase by low single digit, ii) Optus revenue to decline by mid-single digit, and iii) GDL to incur start-up losses. It now expects group EBITDA to decline by low single digit vs low single digit growth previously (to factor in the weak AUD), which still implies a slight margin improvement.
Source: OSK
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