Friday, November 30, 2012
Singtel
Singtel: Nomura: Upgrades to Buy, and raises TP to $3.80 from $3.27, noting that most of its businesses performing at the same time:
1) Optus downgrade is behind and not likely to see further negative surprises in the near term.
2) Singapore is trending well and Most of its Associates should see underlying earnings improve after 2yrs of declines. and
3) Cashflows remain strong and diversified, with around $3bn in annual FCF(7-8% adjusted FCF yield).
Its valuation looks compelling at 13x FY14F P/E, a 15% discount to regional peers. Catalysts wld be:
1) Operating trends and earnings growth, expect 6-8% pa EPS growth in FY14-15;
2) NetLink Trust’s partial divestment by mid-2014 could realise ~SGD1bn, which could boost dividends;
3) No special dividends are likely until May-2014, but its ordinary yield of 5% is 350bps higher than Singaporean bonds;
4) FX volatility will impact earnings, while Associates’ dividends/cashflows are generally hedged.
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