CGS-CIMB Research is keeping its “add” recommendation on Singtel with an unchanged target price of $3.10. 

In a Feb 9 report, lead analyst Foong Choong Chen expects Singtel’s upcoming 3QFY2021 results to record group EBIT (including regional associates’ PAT) of $605-615 million, 23-25% lower y-o-y, mainly due to Singapore, Optus and Telkomsel, partly buffered by smaller Bharti losses.
On a q-o-q basis, Foong expects the gauge to slide 4-6% on weaker Singapore Consumer, Group Enterprise and Bharti performance.

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He expects Singapore Consumer EBIT for 3QFY2021 to fall by 39-43% y-o-y due to the adverse impact of Covid-19 border closures (on roaming and tourist/migrant workers SIM card sales) and stiff mobile competition; and decline by 18-23% q-o-q on lower Job Support Scheme (JSS) credits and seasonally higher marketing costs. 

“We estimate group Enterprise EBIT eased 7-12% y-o-y owing to ongoing declines in carriage services (higher margin) and Covid-19, which hit roaming and delayed ICT projects; and fell 6-11% q-o-q on fewer JSS credits in Singapore and potentially lower margin at Optus,” says Foong. 

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Meanwhile, Optus Consumer EBIT is expected toplunge by 53.57% y-o-y on lower mobile revenue (lower roaming, tourist/foreign student SIM card sales and data price competition); declining NBN migration fees; and higher NBN-related traffic cost.

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“We estimate 3QFY2021 associate profits (ex-Singapore, in SGD terms) may have risen 5-8% y-o-y, based on reported results. This will be mainly due to smaller share of Bharti losses at $30-32 million (continued mobile subs and ARPU growth), partly offset by lower Telkomsel profits,” says Foong, who sees significant core EPS recovery in FY2022 and asset monetisation as potential re-rating catalysts.

As at 3.30pm, shares in Singtel are trading at $2.39 or 23.0 times FY21 earnings with a dividend yield of 3.1%.