Friday, 21 August 2015

Singtel

OCBC on 13 Aug 2015

Singtel this morning reported 1QFY16 revenue of S$4208.5m, meeting 24% of our full-year forecast; underlying earnings of S$895.0m met 23% of our FY16 estimate. Singtel has also affirmed its earlier guidance, calling for core revenue (Group Consumer and Group Enterprise) to grow at mid single-digit level; EBITDA to grow at low single-digit level. Cash capex remains at S$2.3b and S$3b on accrual basis; free cashflow is likely to come in around S$1.5b. Dividend from associates should come in around S$1.1b in FY16. As 1QFY16 results were mostly in line with expectation, we opt to keep our full-year estimates unchanged. Although we are paring our SOTP-based fair value from S$4.40 to S$4.38 to account for the updated market values of its listed associates, we think that the company’s defensive business should appeal to value investors in times of increased market volatility and potential economic slowdown. Hence we maintain our BUY rating.

Decent start to FY16
Singtel this morning reported 1QFY16 revenue of S$4208.5m, +1.5% YoY but down 3.0% QoQ, meeting 24% of our full-year forecast, while reported net profit climbed 4.8% YoY (+0.3% QoQ) to S$941.6m; underlying earnings inched up 1.6% YoY (-5.8% QoQ) to S$895.0m, or about 23% of our FY16 estimate. As expected, results were impacted by the 11% YoY decline in the AUD against the SGD; otherwise, in constant currency terms, operating revenue grew 8.3% and underlying profit +4.6%. In terms of revenue by segment, Group Consumer grew 1.9% YoY, Group Enterprise slipped 3.3%, while Group Digital Life jumped 195%; for EBITDA, Group Consumer was flat, Group Enterprise -4.2%, Group Digital Life narrowed losses by 16%. 

Affirms earlier guidance for FY16
As expected, Singtel has affirmed its earlier guidance, calling for core revenue (Group Consumer and Group Enterprise) to grow at mid single-digit level; EBITDA to grow at low single-digit level. Singapore mobile revenue should rise by mid-single digit level; Australia mobile revenue by low single digit level; Group ICT revenue to increase by mid single-digit level. It also expects Amobee to turn in around S$350-400m of revenue; but Group Digital Life will still incur a negative EBITDA of S$150-180m. Cash capex remains at S$2.3b and S$3b on accrual basis; free cashflow is likely to come in around S$1.5b. Dividend from associates should come in around S$1.1b in FY16. 

Maintain BUY with new S$4.38 fair value 
As 1QFY16 results were mostly in line with expectation, we opt to keep our full-year estimates unchanged. Although we are paring our SOTP-based fair value from S$4.40 to S$4.38 to account for the updated market values of its listed associates, we think that the company’s defensive business should appeal to value investors in times of increased market volatility and potential economic slowdown. Hence we maintain our BUY rating.

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