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Analysts cut Singtel earnings forecasts after weak 3Q results

Jeffrey Tan
Jeffrey Tan • 2 min read
Analysts cut Singtel earnings forecasts after weak 3Q results
The lower revisions come after the telco reported a weak set of results in 3QFY2020.
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SINGAPORE (Feb 14): While analysts are mixed on the prospects of Singapore Telecommunications’ (Singtel) various businesses and associates, they are certainly bearish on the telco’s bottomline ahead.

RHB Securities Research has cut its core earnings forecasts FY2020 to FY2022 by 4% to 12%.

Similarly, DBS Group Research has reduced its FY2020 and FY2021 core Ebitda forecasts by 5% and 11%, respectively.

The lower revisions came after the telco reported a weak set of results in 3QFY2020 ended Dec 31 on Feb 13.

According to RHB Securities, the recovery in the company’s enterprise revenue is expected to be pushed back, owing to the novel coronavirus outbreak.

The brokerage also sees “challenging business dynamics” facing its Australian subsidiary Optus, in addition to competition against its associates.

This could lower the telco’s prospective dividends, warns RHB.

However, DBS Group Research is confident that Singtel’s associates could do better ahead.

It expects Indonesian associate Telkomsel to record a low single-digit growth in FY2020, despite “aggressive” competition in regions outside Java.

It also expects Thai associate Advanced Info Service to continue to record low-to-mid single-digit growth in contributions supported by “amicable” market conditions.

Moreover, Philippine associate Global is unlikely to come under heavy threat from new entrants in FY2020 and FY2021.

In India, DBS reckons associate Bharti Airtel will narrow its losses in FY2020.

This will be aided by the company’s potential refinancing of debt through the rights issue and its ongoing cost cutting measures, it says.

In addition, Singtel’s dividends could be supported by the potential divestment of its non-core, digital and data centre businesses over the next 12-to-18 months.

Singtel’s earnings tumbled 24% y-o-y to $627.2 million in 3QFY2020.

This came on the back of weakness in its enterprise business, the impact of the final settlement of a gain on the company’s Airtel Africa pre-IPO investment, as well as lower exceptional gains.

Its operating revenue slid 5% y-o-y to $4.4 billion, owing to lower equipment sales, weaker business sentiment and spending, continued price erosion in carriage services and heightened market competition.

RHB has maintained its “neutral” call for the stock with a lower target price of $3.45 from $3.50 previously.

DBS has kept its “buy” recommendation for the stock with a lower target price of $3.63 from $3.80 previously.

As at 12.35 pm, Singtel was down 3 cents or 0.9% at $3.25, with some 21.8 million shares changed hands.

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