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).
? Reiterate Add. 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,
growing 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 growth 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 growth 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, which fell just 0.9% yoy to S$342m (lingering effects from earlier
price war, falling legacy revenue, higher tow er lease cost). We see improving prospects
in Indonesia as competition is easing, with various players optimising tariffs in Mar-Apr.
Reiterate Add with 3% lower SOP-based TP of S$3.20
We tweak 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. Downside risk: price wars.