All three telcos reported 2QCY13 results that came in with our expectations. But going forward, the outlook is generally more muted, given that the key mobile market is already quite saturated (growth is likely to come from tariff hikes rather than the addition of new subscribers). As before, the spectre of rising interest rates is making the telcos’ yields less attractive (currently their forecast yields are around 4.7%), although these stocks should still have a place in any portfolio for their defensive earnings. We also do not see any potential growth drivers in a pretty saturated mobile market. Hence we maintain NEUTRAL on the sector.
Results were mostly in line
All three telcos reported 2QCY13 results that came in with our expectations. M1’s core 1H13 earnings met 52% of our full-year forecast and StarHub’s 1H met 53%; SingTel’s 1QFY14 met 24%. M1 declared an interim dividend of S$0.068/share, versus S$0.066 last year. StarHub declared a quarterly dividend of S$0.05/share, as guided.
Review of Singapore mobile operations
Core post-paid mobile subscribers grew by 1.0% QoQ to 4.36m in the Apr-Jun quarter, led by StarHub (+1.3% QoQ), SingTel (+1.0%) and M1 (+0.8%). But overall subscriber growth seems to be slowing as the market is already 151.9% penetrated. Nevertheless, monthly ARPUs ticked upwards for all three telcos, boosted by more subscribers switching over to the new tiered-pricing plans with less generous data bundles; the number of subscribers who exceeded their free bundled data also grew, as more people moved onto the faster 4G network.
SingTel cuts outlook for rest of the year
While M1 expects to see moderate earnings growth this year and pay out at least 80% of earnings as dividends, both SingTel and StarHub are more muted in their outlooks. In particular, SingTel now expects group revenue to decline by mid single-digit level and EBITDA to decline by low single-digit level, citing the persistently weaker AUD. StarHub continues to expect low single-digit revenue growth with an unchanged EBITDA margin of 31%.
Yields are not that attractive
As before, the spectre of rising interest rates is making the telcos’ yields less attractive (currently their forecast yields are around 4.7%), although these stocks should still have a place in any portfolio for their defensive earnings. We also do not see any potential growth drivers in a pretty saturated mobile market. Hence we maintain NEUTRALon the sector.
All three telcos reported 2QCY13 results that came in with our expectations. M1’s core 1H13 earnings met 52% of our full-year forecast and StarHub’s 1H met 53%; SingTel’s 1QFY14 met 24%. M1 declared an interim dividend of S$0.068/share, versus S$0.066 last year. StarHub declared a quarterly dividend of S$0.05/share, as guided.
Review of Singapore mobile operations
Core post-paid mobile subscribers grew by 1.0% QoQ to 4.36m in the Apr-Jun quarter, led by StarHub (+1.3% QoQ), SingTel (+1.0%) and M1 (+0.8%). But overall subscriber growth seems to be slowing as the market is already 151.9% penetrated. Nevertheless, monthly ARPUs ticked upwards for all three telcos, boosted by more subscribers switching over to the new tiered-pricing plans with less generous data bundles; the number of subscribers who exceeded their free bundled data also grew, as more people moved onto the faster 4G network.
SingTel cuts outlook for rest of the year
While M1 expects to see moderate earnings growth this year and pay out at least 80% of earnings as dividends, both SingTel and StarHub are more muted in their outlooks. In particular, SingTel now expects group revenue to decline by mid single-digit level and EBITDA to decline by low single-digit level, citing the persistently weaker AUD. StarHub continues to expect low single-digit revenue growth with an unchanged EBITDA margin of 31%.
Yields are not that attractive
As before, the spectre of rising interest rates is making the telcos’ yields less attractive (currently their forecast yields are around 4.7%), although these stocks should still have a place in any portfolio for their defensive earnings. We also do not see any potential growth drivers in a pretty saturated mobile market. Hence we maintain NEUTRALon the sector.
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