Singtel 2Q earnings treble on NetLink divestment gains; declares special dividend of 3 cents/share

Singtel 2Q earnings treble on NetLink divestment gains; declares special dividend of 3 cents/share

Michelle Zhu
09/11/17, 07:30 am

SINGAPORE (Nov 9): Singtel has announced earnings of $2.9 billion for the 2Q17 ended Sept, up threefold from $972.3 million in 2Q16 on gains from the divestment of 75.2% of its stake in NetLink Trust in July this year.

See: Singtel to divest majority stake in NetLink Trust to under 25%

This brings the telco’s earnings for the first half of the year to $3.8 billion, doubling from $1.9 billion in 1H17.

The board has approved an interim dividend of 6.8 cents per share as well as a special dividend of 3 cents per share, totalling $500 million out of $2.3 billion in proceeds from the divestment of NetLink Trust.

Operating revenue for the quarter grew 7% to $4.37 billion from $4.1 billion a year ago. This included revenue contributions from digital marketing company Turn which was acquired in April this year.

Segment-wise, Group Enterprise revenue grew 6% as robust growth in ICT services offset the decline in traditional carriage services, while Group Digital Life’s revenue jumped 89% as Amobee delivered strong revenue growth and positive EBITDA.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 5% on the back of a strong performance of the group’s core business. This was bolstered by higher postpaid mobile and fixed broadband customer numbers in Australia.

In Australia, Optus delivered strong mobile, particularly in branded postpaid, and NBN customer growth such that continued customer growth and lower expenses lifted EBITDA despite higher content costs and credits from device repayment plans.

Consumer revenues in Singapore, however, dipped 2% due mainly to ongoing voice to data substitution, while mobile communications revenue declined on lower voice and roaming revenues as well as an increase in demand for SIM-only plans. The timing of smartphone launches also impacted recontracting volumes, leading to lower subscriber acquisition and retention costs.

Group underlying net profit for the quarter slid by 4% as it was impacted by Airtel, which continues to face intense price competition in India. Excluding Airtel, underlying net profit would have risen 3%.

Airtel’s lower earnings in India were partially offset by improved operational performance in Africa.

Highlighting the strength of the group’s core and digital businesses, Chua Sock Koong, Singtel Group CEO notes that the latest 1H results were achieved against a tougher business backdrop.

“The regional markets remain attractive as our associates continue to drive customer growth and data consumption. Airtel’s merger with Tata Teleservices in India will create significant synergies and this consolidation will also prove healthier for the Indian telecoms industry in the long term,” says Chua.

See: India’s Tata to merge consumer mobile businesses under Bharti Airtel

RHB says Singtel’s 2Q results came below market expectations at 40% of consensus.

This came on the back of continued weak associate contributions, down 11% from a year ago.

Group EBITDA was up 5% y-o-y in 2Q18 on stronger revenue and good cost controls.

Positive was the proposal of a $0.03 special DPS on top of an interim DPS of $0.068 although the market had expected more.

RHB is keeping its forecasts, SOP-based $3.90 target price and “neutral” recommendation under review pending the results call with management later on Thursday.

As at 10.47am, shares in Singtel are down 3 cents at $3.75 or 13.9 times FY18 earnings.

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