SINGAPORE (May 18): SingTel is about to release its 4Q20 results next week and CGS-CIMB is forecasting core net profit of $620 million to $640 million, or 8-11% lower y-o-y, mainly due to Optus and Singapore.
On a q-o-q basis, analyst Foong Choong Chen in a Friday report believes that earnings would rise by 13-16% due to improvements at Bharti, Globe and Optus. He also expects SingTel to pay a final DPS of 10.7 cents, as per its FY20 guidance.
Foong has kept his “add” recommendation on SingTel with a target price of $3.40.
Foong believes that SingTel’s operations in Singapore, as well as Optus will remain soft y-o-y. Singapore’s 4Q20 core net profit is believed to have dropped by 20-26% y-o-y due to weaker mobile revenue (intense competition, plus lower roaming and device sales exacerbated by Covid-19); enterprise EBITDA margin erosion (lower contract value on renewal); and higher depreciation.
Optus on the other hand is expected to see 32-36% lower core net profit for 4Q20 due to lower enterprise EBITDA (lower revenue and margin), higher depreciation, and 5.6% weaker AUD compared to SGD.
Meanwhile, associate contributions in SGD terms are likely to grow 18-21% y-o-y for 4Q20, led by smaller share of Bharti losses, based on consensus forecasts. This would be partly offset by lower contributions from AIS, Netlink Trust (NLT), Telkomsel, and Intouch.
“While we estimate net debt/group EBITDA will stay under 2 times by end-FY21/22, we concede there is a risk of Singtel cutting its FY21F DPS from 17.5 cents,” says Foong.
“Two key factors which may sway Singtel’s decision are its medium-term earnings outlook (which may now be viewed structurally lower, compared to when it first committed to a 17.5 cents DPS for FY19- 20 to ride out short-term earnings volatility), and the oncoming 5G capex,” he adds.
As at 11.30am, shares in SingTel are trading at $2.67.
