SINGAPORE (Feb 13): Singtel booked earnings of $627.2 million for 3QFY2020 ended December, some 24% lower than the $822.8 million a year ago.
This was attributable primarily to weakness in the group’s enterprise business which reported declines of 4% and 11% in its revenue and EBITDA figures respectively, the impact of the final settlement of a gain on the group's Airtel Africa pre-IPO investment, as well as lower exceptional gains.
Excluding exceptional items, Singtel noted that its underlying net profit would have declined by 19%.
Operating revenue for the quarter slid 5% to $4.4 billion on the back of lower equipment sales, weaker business sentiment and spending, continued price erosion in carriage services and heightened market competition.
On the consumer front, the group’s Australia market revenue rose 1% as higher National Broadband Network (NBN) migration revenue was partially offset by lower equipment sales and price competition. Mobile service revenue for the quarter also registered a decline due to a higher mix of SIM-only customers and data price competition.
In Singapore, overall revenue fell 5% on the back of lower mobile revenue due to the timing of handset launches, lower voice usage and data price competition. Revenue from the fixed services and pay-TV segments each saw increases of 1% each.
Earnings per share for the quarter came in at 3.84 cents.
As at end-December, cash and cash equivalents stood at $576.1 million.
As Singtel declares dividends on a half-yearly basis, no dividend was declared to the quarter. The board had approved an interim one-tier exempt ordinary dividend of 6.8 cents per share for 1HFY2019, which was paid out in January.
However, Singtel CEO Chua Sock Koong says that the group’s dividend guidance for the full year FY2020 ended March 2020 remains unchanged at 17.5 cents, subject to reviews by the board.
Chua notes that the ongoing coronavirus (Covid-19) has adversely impacted Singtel’s roaming business the most due to travel restrictions imposed by several countries.
“The coronavirus has dampened consumer sentiment, which is definitely something for us to take into consideration,” says Chua, adding that the roaming business is not a small part of the group’s Singapore business.
Bill Chang, CEO of Singtel's Group Enterprise stresses that supply chains across different countries have also been disrupted, with sectors such as retail, F&B, hospitality and travel being among those that are bearing the brunt of the virus and can expect to see declines in activity and earnings in the months ahead.
The group also noted that the extension of the deadline for 5G network licence bid to Feb 17 by the Infocomm Media Development Authority (IMDA) has allowed its vendors to work through “a number of issues”.
“We exercise vendor diversity, and invite all vendors to tender for 5G equipment. It is, however, up to the vendors to demonstrate their abilities to meet our security requirements,” says Chua.
Looking ahead, Singtel is bracing itself for intense competition and carriage declines amid weaker business and consumer sentiments. “We expect lower equipment sales and more sales of lower margin devices to continue into the fourth quarter,” says the group.
For FY2020, the group expects revenue to be stable and EBITDA to decrease by low single digits, while capital expenditure for the year is forecasted to total some S$2.1 billion.
For the group’s digital banking license, Chua says that the group has no updates on its submission, but will inform the market accordingly should there be any significant updates, “good or otherwise.”
Although analysts at OCBC Investment Research say that Singtel's results were "below expectations", they note that profit contributions from the group's regional associates staged a 15% y-o-y increase with lower pre-tax losses from Indian associate Bharti Airtel, as well as stronger performance from Globe in the Philippines. This was, however, partially offset by lower contributions from Indonesian associate Telkomsel.
The brokerage is maintaining its "buy" call on Singtel, but has placed its fair value estimate of $3.53 under review.
As at 9.40am, shares in Singtel are trading five cents lower, or 1.5% down, at $3.29.
