SingTel - OCBC Investment 2023-02-17: In-line Set Of Results

• Rebound in mobile service revenue.
• NCS’ margin pressure could improve in the coming quarters.
• Optus returned to customer net add position.

SingTel's 3QFY22 underlying net profit rose 18.2% y-o-y

• SingTel (SGX:Z74)’s 3QFY23 (Oct-Dec 2022) results met expectations. Operating revenue fell 5.1% y-o-y to S$3.7b in 3QFY23, due to the absence of contributions from Amobee and 8% decline in the AUD. On an underlying basis (in constant currency basis and excluding contribution from National Broadband Network (NBN) migration and Amobee), operating revenue would have grown 6.0% y-o-y, driven by higher NCS’ revenue and a rebound in roaming across Singapore and Australia.
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Strong roaming recovery and 5G migration; NCS and Optus face margin pressure

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• Optus’ revenue and EBITDA in 3QFY23 fell 3.8% and 15.1% y-o-y. Optus returned to customer net add position in mid Dec 2022 as it regained customer trust and confidence after the cyber attack last year.
• Separately, NCS continued to be weighed by margin pressure. Despite a 21% y-o-y increases in revenue, 3QFY23 EBIT of NCS was down 53.9% y-o-y to S$23m but improved from S$6m in 2QFY23. We note that NCS’ order books remained strong as companies accelerate their digital transformation.
• Management expects NCS’ margin pressure (due to post-acquisition costs, investments in digital capabilities and higher labour cost) to improve as the cost of scaling the business eases in the coming quarters.

Capture enterprise demand for 5G application and digitalisation

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Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2023-02-17 SGinvestors.io

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