SingTel reported 2QFY13 results that were mostly in line with our expectations (though it missed the street’s forecast). It also declared an interim dividend of S$0.068/share, unchanged from last year. But the biggest surprise was the downgrade of its guidance for consolidated revenue to decline by single-digit versus growth previously; this likely weighed by weaker-than-expected performance in Australia due to increased competition. Taking this into account, as well as the latest market value of its regional associates, our SOTP-based fair value eases from S$3.61 to S$3.53. But we maintain our BUY rating as there is still an upside of >10% from here; we could also see a potential margin recovery on faster-than-expected take-up of LTE services in 2013.
2Q13 results mostly in line
SingTel reported its 2QFY13 revenue easing 0.8% YoY (but +0.9% QoQ) to S$4572.0m, underpinned by strong operating performance from Singapore and its regional mobile associates despite the impact of weaker regional currencies. Reported net profit fell 1.6% YoY and 8.2% QoQ to S$867.7m, while underlying net profit rose 0.1% YoY and 4.2% QoQ to S$886.0m. 1H13 revenue fell 1.2% to S$9105.0m, meeting 48% of our FY13 forecast, while core earnings eased 1.3% to S$1736.0m, or 45% of estimate. SingTel has also declared an interim dividend of S$0.068/share, or a payout of 62% of underlying earnings.
Guiding for revenue decline in FY13
Going forward, SingTel now expects consolidated revenue to see single-digit decline (versus growth previously), with EBITDA remaining stable. Citing increased competition in Australia, SingTel is also guiding for Australia’s revenue to decline by mid single-digit this FY, versus single-digit growth previously, although management still expects EBITDA to remain stable. Other deteriorations in outlook include guiding for Group Consumer and Group Mobile revenues to decline by mid-single digit level (versus low single-digit growth previously). Nevertheless, it has kept its free cashflow guidance to remain around S$2.6b; capex for Singapore to be around S$950m and Australia around A$1.1b. Lastly, it continues to expect ordinary dividends from its regional mobile associates to grow.
Easing fair value to S$3.53
In light of the latest guidance, we also pare our FY12 estimates for revenue by 1.9% and core earnings by 2% (FY13 by 1.5% and 1.8% respectively). We have also adjusted the market value of its associates and this drops our SOTP-based fair value from S$3.61 to S$3.53. But given that there is still an upside of >10% from here, and also a potential margin recovery on the faster-than-expected adoption of LTE services, we maintain our BUY
SingTel reported its 2QFY13 revenue easing 0.8% YoY (but +0.9% QoQ) to S$4572.0m, underpinned by strong operating performance from Singapore and its regional mobile associates despite the impact of weaker regional currencies. Reported net profit fell 1.6% YoY and 8.2% QoQ to S$867.7m, while underlying net profit rose 0.1% YoY and 4.2% QoQ to S$886.0m. 1H13 revenue fell 1.2% to S$9105.0m, meeting 48% of our FY13 forecast, while core earnings eased 1.3% to S$1736.0m, or 45% of estimate. SingTel has also declared an interim dividend of S$0.068/share, or a payout of 62% of underlying earnings.
Guiding for revenue decline in FY13
Going forward, SingTel now expects consolidated revenue to see single-digit decline (versus growth previously), with EBITDA remaining stable. Citing increased competition in Australia, SingTel is also guiding for Australia’s revenue to decline by mid single-digit this FY, versus single-digit growth previously, although management still expects EBITDA to remain stable. Other deteriorations in outlook include guiding for Group Consumer and Group Mobile revenues to decline by mid-single digit level (versus low single-digit growth previously). Nevertheless, it has kept its free cashflow guidance to remain around S$2.6b; capex for Singapore to be around S$950m and Australia around A$1.1b. Lastly, it continues to expect ordinary dividends from its regional mobile associates to grow.
Easing fair value to S$3.53
In light of the latest guidance, we also pare our FY12 estimates for revenue by 1.9% and core earnings by 2% (FY13 by 1.5% and 1.8% respectively). We have also adjusted the market value of its associates and this drops our SOTP-based fair value from S$3.61 to S$3.53. But given that there is still an upside of >10% from here, and also a potential margin recovery on the faster-than-expected adoption of LTE services, we maintain our BUY
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