What headwinds is Singtel facing?
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.