FY22 core profit missed forecast; maintain BUY
FY22 headline profit of SGD1.95b (+252% YoY) missed the MIBG/consensus
expectations, accounting for 83%/89% of full year estimates. Headline
growth was helped by a SGD25m exceptional gain from the partial
divestment of Australian Tower Network. Underlying net profit improved
to SGD1.92b (+11% YoY) mainly boosted by Airtel’s resilient turnaround.
Our new SOTP-based TP of SGD3.02 is lifted 1.3% by revised estimates on
regional associates and potential growth engines in Regional Data Centre
and Digibank. Singtel remains our No.1 pick in the telco sector. Retain BUY.
Revenue fell short
FY22 consolidated revenue fell 2% YoY to SGD15.34b while EBITDA was also
down 2% YoY to SGD3.77b, reflecting lower NBN migration revenue and the
challenges in carriage business. Excluding NBN migration revenue and JSS,
EBIT and EBITDA grew 8% and 33% YoY, respectively, on growth in Optus
mobile service with mobile customer base growing 202k (+2.8% YoY) in the
2H FY22. We cut our FY22-25E Core profit forecast by 8-10 to account for
these. Against the backdrop of global uncertainty and rising inflation,
Singtel has recommended a final DPS of SGD0.048, bringing FY22E DPS to
SGD0.093, or a 3.5% yield. For FY23E, Singtel has guided for regional
associates’ dividends to be at SGD1.1b, with capex of SGD2.6b focused on
increasing 5G investment in Australia.
Bharti Airtel continues to shine
Regional associates’ pre-tax contribution rose 19% to SGD2.14b despite
headwinds from the pandemic and aggressive regional competition. The
performance was fuelled by BHARTI’s strong performance (SGD437m in
FY22 vs SGD23.2m in FY21) due to an improved operating performance.
This has cushioned the impact of declining contributions from Telkomsel (-
0.6% YoY), Globe (-10.1% YoY) and AIS (-5.9% YoY).
Strategic growth drivers
Key re-rating catalyst includes: i) ability to capture sizeable growth
opportunity through expansion of regional data centres, ii) build scale with
the new Digital bank (GxS) and iii) resumption of regional roaming
revenue. We remain sanguine about the overall opportunity although we
expect the immediate contribution to be small. We also foresee potential
partial stake sales in Bharti Airtel and other regional associates as part of
capital reallocation efforts.