What head­winds is Sing­tel fac­ing?

Singapore Business Review - - FIRST -

Gre­gory Yap, an­a­lyst at May­bank Kim Eng

Sing­tel may not be able to main­tain >70% pay­out if it needs to re­serve cash for spec­trum, net­work, or other in­vest­ments, es­pe­cially if as­so­ci­ate div­i­dends start to flag. Com­pet­i­tive pres­sures on Bharti Air­tel be­come more in­tense, lead­ing to greater-than-ex­pected profit de­cline.

TPG’S en­try into both Sin­ga­pore and Aus­tralian mo­bile mar­kets be­come more prob­lem­atic than ex­pected. Still, we ex­pect Sing­tel’s div­i­dends to re­main the most se­cure and sta­ble (cur­rent yield 4.7%) de­spite higher-than-ex­pected spec­trum cost vs fore­casted de­clines for the other two tel­cos.

RHB Group Re­search

Sing­tel is now up against the un­mis­tak­able fourth en­trant (TPG) across both the Sin­ga­pore and Aus­tralian mar­kets. We be­lieve this could cap share price up­side as in­vestors take stock of greater earn­ings risks be­yond its home turf. Down­side risk is nonethe­less lim­ited by its fairly at­trac­tive and sus­tain­able div­i­dend yield of 5%.

We cut our FY18/19 core earn­ings fore­casts by 8-13%, mainly to fac­tor in higher ac­qui­si­tion and re­ten­tion ac­tiv­i­ties at Op­tus, with the en­try of TPG and higher capex as per man­age­ment’s guid­ance. Key risks in­clude stronger-thanex­pected com­pe­ti­tion, forex volatil­ity, and higher-than-ex­pected losses from ad­ja­cent busi­nesses.

Nidhi Dhruv, vice pres­i­dent and se­nior an­a­lyst at Moody’s

We ex­pect group rev­enues to grow by 1-3% in FY2017-18. How­ever, for­eign cur­rency fluc­tu­a­tions will con­tinue to po­ten­tially im­pact Sing­tel’s earn­ings growth, since it de­rives over 65% of its earn­ings (on a re­ported ba­sis) from out­side Sin­ga­pore.

Sing­tel main­tained a div­i­dend pay­out ra­tio of 73% of un­der­ly­ing net profit and an­nounced a fi­nal div­i­dend of $1.75b, which takes its to­tal div­i­dends for FY2016-17 to $2.86b.

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