Singtel

Singtel: Australian consumer and Singapore-centric enterprise divisions account for 47% and 27% of revenues respectively. Expects a stable outlook for core business. Singapore infocomm spend increased 15% to S$2.2mn in CY14 and is likely to gather momentum in cyber security and traffic management which would play Singtel’s strengths.

Optus mobile services revenue grew 3% in FY15. Singtel is ramping Optus capex to c.21% of sales (FY15 15%) to build on revenue momentum. Coupled with the 700Mhz spectrum, it should help improve network quality and reduce the c.10% ARPU discount to Telstra in the medium-term.

Singtel joint venture with Singapore EDB and purchase of Trustwave (cyber security) puts it in a robust competitive position and expect EBITDA losses in Digital Life portfolio to peak in FY17, driven by ramp up of HOOQ in the associates markets.
Deutsche forecasts 3-yr revenue and EPS CAGR (FY15-18E) of 2.6% and 7.6% respectively, aided by robust growth of associates. The house has a BUY rating with a TP $4.60.

Additionally, UOB Kay Hian also has a BUY rating with TP of $4.80 as it believes Singtel provides a hedge against regulatory uncertainties in SG due to its diversified exposure to overseas markets.