Singtel

OCBC on 11 May 2012

SingTel reported its 4QFY12 results this morning, with revenue rising 3% YoY (but down 1% QoQ) to S$4,780m. Revenue was 6.1% ahead of our forecast, lifted by the 4% YoY strengthening of the AUD against the SGD. Core net profit (excluding exceptionals and tax credit) came in around S$1,023m, up 2.5% YoY and 14.3% QoQ, but smack on our forecast. For FY12, revenue gained 4.2% to S$18,825m, or 1.5% ahead of our estimate, while core net profit fell 3.3% to S$3,676m, again smack on our forecast. SingTel has recommended a final dividend of S$0.09/share, bringing the total dividend for this year to S$0.158, representing a payout ratio of 68%. Going forward, SingTel expects consolidated revenue in FY13 to grow at a low single-digit level and EBITDA to remain stable. Free cash flow is estimated to be around S$2.6b, after spending around S$950m of capex in Singapore and A$1.1b in Australia. SingTel also expects ordinary dividends from regional mobile associates to grow and its own dividend payout ratio to be maintained at 55-70%. We maintain BUY but slightly tweaked to S$3.68 from $3.69 to reflect the divestment of Far Eastone.

4QFY12 results in line with forecast
SingTel reported its 4QFY12 results this morning, with revenue rising 3% YoY (but down 1% QoQ) to S$4,780m. Revenue was 6.1% ahead of our forecast, lifted by the 4% YoY strengthening of the AUD against the SGD. Core net profit came in around S$1,023m, up 2.5% YoY and 14.3% QoQ, but smack on our forecast. For FY12, revenue gained 4.2% to S$18,825m, or 1.5% ahead of our estimate, while core net profit fell 3.3% to S$3,676m, again smack on our forecast. SingTel has recommended a final dividend of S$0.09/share, bringing the total dividend for this year to S$0.158, representing a payout ratio of 68%.

Restructured business entity from 1QFY13
Going forward, the group will continue to transform its business to sustain competitiveness, innovation and growth. It has also reorganised itself by customer segments to exploit growth opportunities globally. From the analyst teleconference, we got a sense that management is particularly upbeat about the mobile advertising market, which it had earlier described as “nascent”, and has great potential in the emerging markets in Asia.

Eyes mild EBITDA margin pressure
Back to specifics, SingTel expects consolidated revenue in FY13 to grow at a low single-digit level and EBITDA to remain stable; although this implies potential EBITDA margin pressure, which could arise from initial start-up costs associated with its Group Digital Life segment. Meanwhile, free cash flow (excluding associate dividends) is estimated to be around S$2.6b, after allocating S$950m of capex in Singapore and A$1.1b in Australia. SingTel also expects ordinary dividends from regional mobile associates to grow and its own dividend payout ratio to be maintained at 55-70%.

Maintain BUY with S$3.68 fair value
To reflect the latest guidance, we have raised our FY13 revenue forecast by 1.1% and earnings by 3.4%. Our SOTP-based fair value is slightly tweaked to S$3.68 from $3.69 to reflect the divestment of Far Eastone. Maintain BUY.