SINGAPORE (Feb 9): CIMB Research is keeping its “add” rating for Singapore Telecommunications (Singtel) but lowering is target price marginally to $4.00, from $4.10 previously.
This comes after Singtel’s 3Q18 results “slightly missed” the research house’s expectations due to drag from its associates and the Singapore consumer segment.
Singtel saw its earnings fall 8.5% to $890.2 million in the 3Q ended December, from $972.8 million a year ago.
This was mainly due to lower contributions from associates due to lower profits at Airtel, Telkomsel and Globe, as well as lower contribution from NetLink NBN Trust following Singtel’s reduction in its economic interest.
In addition, Singapore consumer revenue fell 5.5% on declines in voice revenues and equipment sales, as well as cessation of revenue from sub-licensing of TV content rights from this quarter.
See: Singtel posts 8.5% decline in 3Q earnings to $890 mil on lower contribution from associates
“We cut our FY18-20 core EPS by 3-6% to factor in higher depreciation, lower associate contribution (from Telkomsel, Bharti, and Netlink Trust), and latest forex rates for associate currencies, which have largely weakened against the Singapore dollar,” says analyst Foong Choong Chen in a report on Thursday.
Post-revision, Foong forecasts Singtel’s core earnings per share to decline by 8.3% in FY18, before recovering by 2.2% in FY19 and by 7.4% in FY20.
According to Foong, the improvement in FY19-20 will be driven by stronger earnings by associates Bharti, Telkomsel, and AIS, as well as lower losses from its digital life segment.
As at 3.05pm, shares of Singtel are trading 1 cent lower at $3.39, implying an estimated price-to-earnings ratio of 15.2 times and a dividend yield of 4.9% for FY18.
