2HFY22 in line; Bharti to lead recovery
? 2HFY22 core net profit rose 5% yoy. FY22 earnings were in line, +11% yoy,
mainly due to Bharti’s turnaround. 4.8 Scts 2HFY22 DPS a positive surprise.
? We see core EPS rising by 30%/22% in FY23F/24F (Bharti, SG & Telkomsel).
? ReiterateAdd. TP cut 3% to S$3.20 for Singtel, our top Singapore telco pick.
2HFY3/22 core EPS was in line; dividend a positive surprise
Singtel’s 2HFY22 core net profit came in at S$941m, up 4.9% yoy (-4.3% hoh). This w as
mainly due to a turnaround in Bharti’s earnings, partly offset by low er Singapore (SG),
Optus and other associates’ profits. FY22 core net profit rose 10.9% yoy to S$1.92bn,
grow ing for the first time after four years of consecutive declines. This w as in line, just 2%
shy of our forecast. Singtel positively surprised by declaring a 2HFY22 DPS of 4.8 Scts.
This brings full-year DPS to 9.3 Scts (80% payout) vs. our projected 8.9 Scts (75%
payout). For FY23, Singtel projects low er dividends of S$1.1bn (FY22: S$1.38bn) from
the regional associates and higher capex of c.S$2.6bn (FY22: S$1.9bn).
Weaker SG & Optus earnings yoy; mobile revenue rose for both
SG’s 2HFY22 core net profit fell 19% yoy (-32% hoh) to S$166m on low er device sales
(global supply shortage, shift to SIM-only) and enterprise EBITDA margin, plus higher
depreciation. Mobile service revenue rose 1.7% yoy due to gradual roaming recovery and
5G plan adoption. For FY23F, w e expect SG earnings to grow 24% yoy on higher mobile
revenue, better device sales and low er content cost. In Australia, Optus’s 2HFY22 core
net profit fell 94% yoy (-95% hoh) to S$2m due to low er device sales, drop in NBN
migration fees and higher depreciation, partly offset by low er cost (ex-NBN: +100%).
Mobile service revenue grew 3.8% yoy on healthy subs grow th and full half-year
contribution from amaysim. We do not see a rebound in Optus’s FY23F earnings due to a
further drop off in NBN migration fees, plus higher depreciation and net finance cost.
Bharti’s turnaround lifts associates’ earnings contribution
2HFY22 associate contribution rose 19% yoy (+3% hoh), led by a turnaround in share of
Bharti’s profits to S$148m (2HFY21: -S$9m), on continued grow th in mobile subs, A RPU
and EBITDA margin, after Jul/Nov 21 tariff hikes. Notably, a 130% qoq spike in its
4QFY22 earnings bodes w ell for Singtel’s FY23F. Slightly better-than-expected w as
Telkomsel earnings, w hich fell just 0.9% yoy to S$342m (lingering effects from earlier
price w ar, falling legacy revenue, higher tow er lease cost). We see improving prospects
in Indonesia as competition is easing, w ith various players optimising tariffs in Mar-Apr.
Reiterate Add with 3% lower SOP-based TP of S$3.20
We tw eak FY23F/24F core EPS for low er Singapore, Optus, Telkomsel and Bharti
(consensus) earnings. Our TP fell mainly due to the increase in the risk-free rate to
2.75% (previous: 2.5%). Re-rating catalysts: FY23-24F core EPS recovery, further asset
monetisation, expansion into higher-grow th business areas. Its current share price
implies an FY23F EV/EBITDA of just 3.8x for SG and Optus. Dow nside risk: price w ars.