Maybank Securities maintains its “buy” call on Singapore Telecommunication with an unchanged target price of $3.70, following a mixed bag of results posted by its various regional associates.
Maybank analyst Hussaini Saifee estimates aggregate 2QFY2025 post-tax contributions from Singtel’s key associates’ fell 3% y-o-y but rose 5% q-o-q.
Bharti Airtel’s 2QFY2025 earnings rose by 32% y-o-y and 34% q-o-q, while Globe had a 22% y-o-y growth.
On the other hand, Telkomsel disappointed with a 23% y-o-y and 16% q-o-q decrease in core earnings, attributed to weak revenue and increased costs.
As expected from the varied geographical nature of these associates, Singtel had to put up with a negative 3 percentage point hit on the contributions because of forex volatility.
Overall, Saifee estimates that 1HFY2025 post-tax contributions from associates for Singtel has achieved 41% of his and 44% of the Street’s full-year forecast.
Airtel & Globe
Bharti Airtel’s 2QFY2025 revenue and earnings before interest, taxes, depreciation and amortisation (ebitda) rose by 12% y-o-y, while capital expenditure (capex) declined 17% y-o-y.
According to Saifee, “it was strong all round, with revenue of the India business growing 17% y-o-y, and revenue of the Africa business (in constant FX terms) up 21% y-o-y.”
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Average revenue per user (ARPU) rose 15% y-o-y to INR233 ($3.69) and was also up 11% q-o-q. Saifee, citing the company’s management, notes that there is an upside target reaching INR300 in the medium term.
Similarly, Globe’s earnings were strong, increasing 22% y-o-y. While mobile momentum slowed to 3% y-o-y in 3QCY2024, it was offset by strong enterprise revenue growth of 27% y-o-y.
GCash’s earnings grew 104% y-o-y and contributed to 22% of Globe’s core earnings.
Tellkomsel & AIS
The decline in Telkomsel’s earnings can be attributed to softness in mobile revenue and Indihome’s flat revenue
“Overall, industry momentum is softening, while Telkomsel continues to lose market share as competitors posted 3% - 8% y-o-y revenue growth for 3QCY2024,” Saifee adds.
Telkomsel’s costs increased moderately, resulting in a 3.8ppt y-o-y and 2.6ppt q-o-q decline in ebitda margin.
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AIS’s 3QCY2024 core profit grew 12% y-o-y, in line with Maybank Investment Banking Group’s and consensus forecasts.
AIS’s mobile revenue grew 5.6% y-o-y and 0.6% q-o-q, while FBB revenue grew 146% y-o-y and 2.1% q-o-q.
This growth was supported by “impressive subscriber gains” and higher ARPU, Saifee states.
Aside from Telkomsel, Saifee believes that all of Singtel’s associates are in a firm position to deliver growth as competition rationalises further, and are boosted by catalysts such as data centres (DC) and enterprise in India and GCash in Philippines.
For the core business, Saifee expects DC growth and Optus’ revival as potential areas of upside.
Additionally, Saifee notes that a 5% - 6% forward yield makes Singtel defensive.
As at 11.25am, units in Singtel are trading 4 cents lower or 1.25% down at $3.16.
