SG Telecom

SG Telecom: Deutsche note that structural challenges emerging with growing data focus.
2 worrying structural trends are:
1) no mobile voice rev growth over 1H11 with rev gains driven entirely by data.
2) SG telcos barely managed to hold 1H11 EBITDA steady yoy despite a combined $145m rev gain, as margins contracted to a new low.

Rev gains entirely eroded on margin compression. M1 and SingTel led rev gains while Starhub stood out for EBITDA growth. Starhub remains as top pick for the sector, with Buy Call for the attractive and defensive div yield.
House has Hold rating on SingTel and expect the stock to remain range-bound over the medium-term. Remain Sellers of M1 on valuations and excessive optimism around the fixed-line business.

Singtel: UBS reiterate Buy, but reduce TP to $3.47 from $3.60. Expect Bharti to benefit from improving sector outlook. SingTel is defensive with upside from Bharti, trading below historical multiples at forward PE of 11.9x vs 5yr avg of 13.2x.