Likely a decent start to FY3/23F
- 1QFY3/23F core EPS likely rose 6-9% yoy and 3-5% qoq to S$480m-490m. 1QFY23F core EPS was likely in line at 19-20% of our FY23F forecast.
- We think yoy EPS growth was driven by Bharti & TSEL. Qoq, earnings likely driven by TSEL, Singapore/Optus Consumer and Amobee (narrower losses).
- Reiterate Add and TP of S$3.20 for Singtel, our top Singapore telco pick.
1QFY3/23F core net profit likely in line & rose yoy/qoq
Singtel will release its 1QFY3/23 business performance update on 24 Aug 2022. Based on its associates’ reported results and our estimates for its Singapore (SG) business and Optus, we estimate 1QFY23F core net profit grew 6-9% yoy to S$480m-490m, due to better associates’ earnings. Qoq, core net profit may have risen 3-5% on improved performance at associates, as well as SG and Optus Consumer. 1QFY23F core EPS likely formed 19-20% of our FY23F forecast (19-20% of Bloomberg consensus’). While Bharti’s earnings were slightly soft, we see this as largely in line as Singtel’s earnings may rise more materially in 2Q-4QFY23F (roaming, Bharti, Telkomsel, sale of Amobee).
Singapore/Optus Consumer earnings may fare better qoq
We estimate 1QFY23F SG Consumer EBIT slid 5-12% yoy on lower service revenue, but rebounded 51-63% qoq due to some depreciation normalisation, lower opex and roaming recovery. Group Enterprise EBIT (including NCS and Trustwave) may have eased 15- 20% yoy (down 4-9% qoq), due to lower margin in the carriage business, NCS’s higher staff cost and bigger Trustwave losses. Meanwhile, we expect Amobee to post LBIT of S$10m-15m, broadly stable yoy but narrower vs. 4QFY22’s -S$28m. At Optus, we see Consumer EBIT falling 30-36% yoy as a drop-off in NBN migration revenue and higher depreciation more than offset mobile revenue growth (more rational competition). Nonetheless, this gauge may have jumped 1.4x-1.6x qoq off a low base, led by continued decent take-up of Optus’s Choice plans and cost containment.
4-fold jump in Bharti’s earnings yoy; pick-up in TSEL earnings qoq
We estimate 1QFY23F regional associate profits (ex-SG, in S$ terms) grew 16-19% yoy, underpinned by a 4-fold jump in Bharti’s contribution to S$80m-85m (higher subs, ARPU and EBITDA margin) and higher Telkomsel (TSEL) contribution (easing competition), despite the sale-and-leaseback of its towers. Qoq, we think associate earnings rose 2- 5%, thanks to stronger earnings at TSEL (positive seasonality, tariff optimisation since Feb 22) and Globe (lower opex and interest cost). We see TSEL’s earnings rising further in 2QFY23F given it raised prices in Jun-Jul 22.
Reiterate Add and SOP-based TP of S$3.20
We retain our forecasts, pending the release of Singtel’s business performance update. Re-rating catalysts: FY23-24F core EPS recovery, further asset monetisation, expansion into higher-growth business areas. Its current share price implies FY23F EV/EBITDA of just 3.8x for Singtel SG/Optus, with good 4.2-5.9% yields p.a. Downside risk: price wars.