3QFY24: Soft Results In Line; Forex Movements Continue To Affect Performance
For 9MFY24, Singtel reported a higher underlying net profit (+7.4% yoy), driven by higher contributions from its growth engines. However, 3QFY24 was a soft quarter with net profit flat yoy, dragged by currency headwinds. Optus performed better after the outage incident while Singtel Singapore suffered from weak sentiment. NCS continued its robust growth while margins for the Digital Infraco segment suffered from higher investment costs. Maintain BUY with a lower target price of S$2.99.
RESULTS
• 9MFY24 results in line. Singapore Telecommunications’ (Singtel) 9MFY24 overall group revenue (-3.2% yoy), EBITDA (-2.4% yoy) and underlying net profit (+7.4% yoy) formed 71- 72% of our full-year forecasts, just within our expectations. The soft results were due to a muted 3QFY24, impacted by an appreciating Singapore dollar against regional currencies. Excluding currency movements and contributions from the recently deconsolidated Trustwave in 3QFY24, 9MFY24 underlying operating revenue (+0.9% yoy), EBITDA (-0.3% yoy) and net profit (+10.7% yoy) would have performed better yoy, driven by higher contributions from Singtel’s growth engines (NCS and Digital InfraCo).
• Soft 3QFY24. Singtel’s 3QFY24 overall revenue (-3.2% yoy), EBITDA (+2.6% yoy) and underlying net profit (stable yoy) were dragged by weaker domestic sentiment and currency headwinds, offset by the growth engine NCS and better operating performance from Optus. Excluding currency movements and Trustwave, 3QFY24 EBITDA (+0.9% yoy) and underlying net profit (+1.5 yoy) grew. Also, it was noted that 3QFY24 pre-tax profits from regional associates fell 8.7% yoy, dragged largely by Airtel (-15.9% yoy) and Telkomsel (- 14.9% yoy). Excluding a S$80m currency hit from the depreciation of the Nigerian Naira, Singtel’s 3QFY24 underlying net profit would have grown by around 7-8% yoy.
