SINGAPORE (Aug 11): CIMB is maintaining its “add” call for Singtel with a target price of $4.50, thanks to the performance of its overseas associates.

Despite weaker regional currencies, earnings from associates rose 19.4% largely due to a 31.1% increase in contribution from Telkomsel and a 23.9% improvement at Bharti, surpassing CIMB’s forecasts.

“1QFY17 associate earnings are a bit ahead of expectations at 27.9% of our FY17 forecast,” says CIMB analyst Chen Foong Choong.

For the 1Q ended June, Singtel’s core net profit rose 6.6% from a year ago, driven by earnings from associates but partly offset by lower profits in Singapore and at Australian subsidiary, Optus.

In Singapore, the Enterprise business continues to grow, with Enterprise EBITDA up 4.1% on higher revenue. Digital Life’s negative EBITDA increased 15.2% y-o-y to $36 million, while consumer EBITDA was largely flat on lower other income.

Service revenue at Optus fell 12.7% y-o-y on lower mobile revenue. Postpaid subscriptions grew 0.4% compared to a year ago, partly held back by the deactivation of wholesale subscriptions while prepaid users declined 0.7% due to regulated changes in customer ID verification.

EBITDA inched up 0.7% y-o-y, led lower cost of equipment but largely offset by higher staff, selling and admin costs.

Looking ahead, Chen notes that potential catalysts include a rebound in regional currencies and earnings improvements at Optus while intense competition in Australia, India and Singapore could provide a degree of downside risk.

SingTel closed 1.7% higher at $4.27.