Singtel

Singtel: 2QFY16 results met expectations as net profit dipped 0.8% y/y to $1.03b. Excluding one-off items, underlying profit would have been almost flat at $974m (-0.5%) as adverse currency impact offset growing usage of mobile data across its markets.

Revenue and EBITDA receded 3% to $4.18b and $1.29b respectively, due to a weaker AUD (-13%) and IDR (-6%) but grew 5% in constant currency terms, driven by growth in mobile data, ICT and digital services and strong customer growth momentum in Australia.

Singapore consumer revenue was stable at $597m (-0.2%) as mobile and fixed broadband gained 2.5% and 0.7%, but IDD dropped 15%. Within mobile, while postpaid ARPU fell 3% to $73 due to lower roaming, but is still the highest in the industry, while fixed broadband benefited from more customers taking higher-speed plans. EBITDA rose 10% on continuing good performance in mobile, an improved broadband showing and better cost management.

In Australia, both revenue and EBITDA grew 9% mainly on better 4G coverage now covering 90% of the population, and increasing adoption of Optus' popular My Plan postpaid offer.

Its enterprise business saw a decline in revenue (-3.8%) and EBITDA (-6.4%) but in constant currenct terms and adjusting for the fibre rollout business (transferred to NetLink Trust in Oct '14), revenue would have increased 2.3% with strong growth in ICT across Singapore and Australia, while EBITDA would have improved 3.8%.

Digital Life registered a smaller EBITDA loss of $34m (-15%) as business gained traction across the board. Marketing arm Amobee rose strongly on contribution from acquisitions and increased social and video advertising services, while big analytics arm DataSpark is supported by strong order books from the public sector.

Associates did well, particularly Indonesia's Telkomsel where share of pretax profits rose 21% in SGD terms. Globe in the Philippines benefited from a 5% appreciation of PHP and contributed a 1% rise in pretax profits.

Singtel maintained its interim DPS of 6.8¢ and guidance for FY16:
- Group revenue to rise by mid-single digit
- EBITDA to rise by low single digit
- Capex of $3b, mainly for Australia ($1.9b)
- Digital Life negative EBITDA of $150-180m

Maybank-KE believes the operating trends in 2QFY16 remains intact on continued good performance and maintains its Buy call with TP of $4.50.

Latest broker ratings:
Maybank-KE maintains Buy with TP of $4.50
OCBC maintains Buy but cuts TP to $4.17 from $4.38