SINGAPORE (Oct 27): Credit Suisse is maintaining SingTel at “outperform” with a higher target price of $4.70.
The research house expects its consolidated revenue to grow by 7.7% y-o-y and EBITDA by 3.6% y-o-y, benefiting from appreciation of the AUD vs the SGD and relatively stable Singapore and Australia businesses.
“SingTel is our preferred pick as we have a positive view on the company's enterprise business and international associates -- except for Bharti Airtel. Additionally, the valuation discount to the listed associates has been widening,” says analyst Varun Ahuja in a Thursday note.
SingTel will report its 1Q18 results in mid Nov.
Ahuja expects revenue growth in the quarter to be strong due to the consolidation of Turn. However, he forecasts underlying net profit will decline by 2.8% y-o-y, impacted by the increase in depreciation and amortisation and decline in associates’ contribution due to competitive headwinds in India and declining contribution from NetLink Trust after its spinoff.
SingTel’s Australia business service revenue is expected to grow 2.0% y-o-y, driven by the mobile business. “We expect Australia EBITDA to increase by 1% y-o-y in 2Q18, driven by the top-line performance,” says the analyst.
However, Ahuja sees Optus’ net profit declining 2.9% y-o-y due to higher depreciation and amortisation and finance cost. In SGD terms, he expects 5.7% y-o-y growth in EBITDA and 1.6% y-o-y growth in net income due to 4.8% appreciation of the AUD vs the SGD.
The analyst also forecasts mobile revenue to decline by 1.5% y-o-y in 2Q18, impacted by the fall in roaming revenue and cannibalisation by OTT services.
As at 3.50pm, shares in SingTel are up 3 cents at $3.79 or 15.8 times FY17 earnings.
