SINGAPORE (June 20): OCBC Investment Research says Singtel’s guidance for dividends to be maintained at 17.5 cents for FY19 and FY20 signals a stable cashflow outlook despite the competitive pressures.
Management intends to keep traditional carriage revenues flat over five years as voice-to-data substitution continues, but aims to grow digital and enterprise revenues as a proportion of consolidated revenues from 24% in FY18 to 50% by FY23.
Meanwhile, Singtel’s core markets of Australia and Singapore continue to face competitive pressures in the consumer segment with the impending entry of TPG in both markets.
However, Singtel will continue to differentiate itself by better customer experience and offering innovative offerings such as handset leasing plans as well as exclusive handset deals. Singtel is also digitalising its operations to lower costs and improve customer experience.
For Optus, management expects the initial competition from TPG to be milder given that TPG will launch with data-only mobile plans for the start.
That said, having seen a strong FY18 which saw the addition of 384,000 customers to its subscriber base, Optus will continue to differentiate based on customer experience and premium content among others.
In addition, holding the most 5G spectrum relative to its competitors, Optus intends to leverage on this advantage and launch 5G services in 2019, ahead of its peers.
“We maintain our fair value estimate of $4.10 on Singtel,” says lead analyst Eugene Chua in a Wednesday report or 18.3 times FY19F earnings of 22.4 cents.
As at 11.30am, shares in Singtel are down 2 cents at $3.16, down 14.6% ytd compared to a 3.6% drop in the benchmark Straits Times Index.
