Earnings First Take: FY23 AFF grew by 3%, in line with market expectations
- Adjusted funds flow (AFF) increased by 3% y-o-y in FY23, in line with market expectations
- Service revenue increased by 3% y-o-y, with enterprise revenue growth accelerating to 10%
- Expect accelerating momentum in broadband and enterprise businesses, supporting future AFF growth
- Maintain BUY on the counter with its attractive yield of 8%; TP under review
FY23 AFF grew by 3%, in line with market expectations. HKT (6823 HK) announced its FY23 results on 22 February 2024 after market close. Total revenue grew by 1% y-o-y to HK$34.4bn in FY23. Revenue excluding mobile product sales increased by 3% y-o-y to HK$31.4bn. Telecommunications services (TSS) revenue increased by 1% y-o-y to HK$24.2bn. Local TSS services increased by 2% y-o-y to HK$16.9bn, with broadband and enterprise business revenue growing by 2% and 10%, respectively. Mobile service revenue grew by 5% y-o-y to HK$8.3bn, with roaming revenue increasing by 176% and reaching 72% of pre-COVID level. Number of postpaid customers increased by 3% to 3.4m. Post-paid exit ARPU rose by 2% to HK$191. EBITDA increased by 3% y-o-y to HK$13.4bn, with EBITDA margin expanding 1ppt y-o-y to 39%, thanks to its stringent cost control. Adjusted funds flow (AFF) increased by 3% y-o-y to HK$5.8bn, in line with market expectations. The company proposed a final dividend of HK$0.4444 per share staple unit (SSU), adding to a full year dividend of HK$0.7649 per SSU, representing full payout of AFF.
Maintain BUY on the counter, with its attractive dividend yield of 8%. Enterprise business showed significant improvement post-COVID, with revenue growth accelerating from 3% in FY22 to 10% in FY23. The total contract value of new enterprise project wins surge 20% y-o-y in FY23, supporting future revenue growth. We expect broadband revenue growth to pick up in FY24, as broadband prices began to rise in 2H23. Additionally, we anticipate roaming revenue will continue to ramp up, reaching 90% of the pre-COVID level. We hold a bullish view on the company outlook with its improving broadband and enterprise businesses. We maintain BUY on the counter for its attractive yield of c.8%; TP under review.