SingTel - OCBC Investment 2022-11-15: A Special Dividend Payout Of S$0.05 Per Share

SingTel - A Special Dividend Payout Of S$0.05 Per Share

SINGTEL (SGX:Z74) | SGinvestors.ioSINGTEL (SGX:Z74)
  • Stronger growth from SingTel's mobile service.
  • Provision of AUD142m to cover costs from the cyber attack on Optus.
  • Sharing the benefits of asset recycling initiatives.

SingTel's 1HFY23 results missed expectations but special dividend was a positive surprise

  • SingTel (SGX:Z74)’s operating revenue and EBITDA fell 5.1% and 2.6% y-o-y to S$7.3b and S$1.9b respectively in 1HFY23, dragged down by adverse currency effects, the absence of revenue from NBN migration and Amobee, partially offset by stronger mobile service in 1HFY23.
  • Net profit rose 22.6% y-o-y to S$1.2b, boosted by higher contribution from associates and exceptional gain of S$165m (mainly from partial divestment of stake in Airtel). Underlying net profit for the group increased 2.2% y-o-y to S$1.0b, which forms ~42% of our initial full-year forecasts, below our expectations.
  • An interim dividend of S$0.046 was declared (+2.2% y-o-y), representing 76% of SingTel’s underlying net profit. Meanwhile, SingTel proposed a special dividend of S$0.05 to share the benefits of asset recycling initiatives with shareholders. The special dividend will be payable in 2 tranches of S$0.025 each, together with the ordinary dividends in Dec 2022 and Aug 2023.

Singapore consumer: Growth driven by roaming recovery and 5G migration

  • For Singapore consumer, operating revenue was up marginally by 1% y-o-y to S$874m, as the growth in revenue from mobile service and broadband were partially offset by lower equipment sales and pay-TV revenue in 1HFY23.
  • Mobile service revenue grew 10% y-o-y, boosted by continued roaming recovery and increased 5G adoption. Roaming revenue recovered to 60% of pre-COVID levels, benefiting from a strong rebound in international travels.
  • EBITDA and EBITDA margin improve by 10% and 3 percentage points (ppt) due to revenue growth and tight cost control.

Optus: Rebuilding customer trust and brand post the cyber attack

  • To address the cyber attack on Optus in Sep 2022, a provision of AUD142m has been made to cover costs for external independent review, credit monitoring services and replacement of impacted customer identification documents. SingTel does not anticipate further costs at the moment.

Fair value estimate of S$3.25 for SingTel

  • SingTel recycled ~S$6b over the past 18 months and remains proactive to monetise assets and achieve better capital efficiency. SingTel remains focused on reinvigorating the core business which is well-positioned to benefit from the reopening of economies over time while capitalising on growth trends including growing 5G market share, expanding the footprint of its new digital businesses and scaling up NCS.
  • After adjustments, our fair value estimate for SingTel increases from S$3.06 to S$3.25.

SingTel – ESG Updates

  • Research notes that as of Sep 2021, SingTel’s board lacked an independent majority, fully independent key committees, and an independent chairman. This structure, in research’s view, may undermine the board’s capacity to provide strong oversight of management and financial reporting practices.
  • Furthermore, risks highlighted by multiple controversies—related to its data security and business ethics practices—weigh on SingTel’s rating. Still, relative to industry peers, research highlights that SingTel appears to have strong labour management programs.
  • In terms of carbon emissions, research notes that SingTel’s risk exposure and management practices are in-line with most peers.

Chu Peng OCBC Investment Research | 2022-11-15

Previous report by OCBC:
2022-02-16 SingTel - Encouraging Scorecard;  Dividends Still Expected To Be At Upper Half Of Policy Range.

Price targets by 6 other brokers at SingTel Target Prices.
Listing of research reports at SingTel Analyst Reports.

Relevant links:
SingTel Share Price History,
SingTel Announcements,
SingTel Dividends & Corporate Actions,
SingTel News Articles

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