SingTel

[Musicwhiz]

Bellweather blue chip.

The Straits Times
www.straitstimes.com
Published on Nov 15, 2012
SingTel to see first dip in revenue since 2001
Bottom line hit by tough trading conditions for Australian unit

By Grace Chng Senior correspondent

SINGTEL forecasts that annual revenue will decline this financial year, the first such drop since it acquired Australian telco Optus in 2001.

The decline is being blamed on the tougher trading conditions that Optus faces Down Under.

SingTel said at a results briefing yesterday it derives about 65 per cent of its revenue from Optus but pricing pressure from key rival Telstra and regulatory changes are hitting the bottom line hard.

It said it expects revenue from Optus to drop by a mid-single digit percentage point for the financial year ending March next year. This reverses an earlier forecast of a low-single digit growth in sales.

That in turn means SingTel's overall annual revenue is "expected to decline by low-single digit level", said chief executive Chua Sock Koong yesterday.

The tougher environment was evident in the second-quarter numbers released yesterday.

Total revenue came in at $4.57 billion for the three months to Sept 30, down 0.8 per cent from the same period a year earlier.

Net profit took a bigger hit, falling 1.6 per cent to $868 million.

Optus revenue dropped 4.2 per cent to A$2.24 billion (S$2.86 billion) while net profit fell 10 per cent to A$164 million.

The firm said it will maintain an interim dividend of 6.8 cents per share.

Its earnings per share was 5.45 cents, a drop of 1.4 per cent for the quarter.

Net asset value per share as at Sept 30 was 143.63 cents, up from 141.08 cents on March 31.

The bright spots came from SingTel's associates in the region, including Telkomsel in Indonesia and AIS in Thailand, and its Singapore operations.

The associates' pre-tax contributions reached $574 billion, up 15 per cent despite weaker regional currencies. The Indonesian ru-piah, for example, had dropped 8 per cent from the same quarter last year.

Mr Paul O'Sullivan, chief executive of SingTel's consumer group, said Telkomsel had the biggest nationwide coverage and was expanding its market.

Growth in the other regional associates was fuelled by expansion of their customer bases and data businesses, he added.

SingTel's Singapore operations recorded revenue of $1.67 billion, up 4 per cent.

The bright spot locally came from the enterprise business. Its systems integration arm NCS lifted revenue by 11 per cent to $360 million, fuelled by contracts from the Ministry of Education and other customers.

Mr Bill Chang, chief executive of the enterprise unit, said Singapore customers in manufacturing, automotive and other industries which are expanding into China want to tap into SingTel's large telecoms network in the region.

"Then there are Chinese companies such as those in oil and gas which are expanding into Asia and need our services too," he added.

Revenue for the six months fell 1.2 per cent to $9.11 billion while net profit was stable at $1.81 billion.

Analysts said yesterday that SingTel's fundamentals were strong and they were not concerned about the small decline in its annual revenue.

They noted that since SingTel operated across multiple countries, it was bound to come across areas where the environment will be more competitive than elsewhere.

They pointed to strong fundamentals such as a growing customer base and a good showing by its regional associates.

SingTel shares closed yesterday at $3.16, down three cents.

chngkeg@sph.com.sg

[CityFarmer]

More news update from Singtel's Optus operation

"SingTel has reduced the workforce at Optus in Australia by about 10 per cent and is changing how it sells to consumers, said Chief Executive Officer Chua Sock Koong.
...
Optus is also cutting licensing to other retailers and adding its own stores to compete with its rival Telstra, which has rolled out faster mobile-phone networks to expand market share" - Todayonline

http://www.todayonline.com/Business/EDC1...Optus-unit

[KopiKat]

Bellweather blue chip.

If you are referring to their latest results, then it's a bit hard to quantify that. Singtel biz is spread over several countries with the most significant impact coming from Singapore and Australia operations. For this Q, Singapore is +ve and the main -ve is coming from Australia side. Australia is -ve, mainly due to competition from Telstra, not due to their state of their economy. So, also hard to quantify.

As for the associates, altho' the analysts + news like to focus on the huge -ve at Bharti, if you really look at the numbers, it's actually not very significant (as a % of total Singtel biz). Further, this "huge" Bharti -ve is easily offset by other associates like Telkomsel...

BUT, if you're referring to their SHARE PRICE as a bellweather of Mr Market's moods, then yes, IMO, it's a good indicator...

[CityFarmer]

Bellweather blue chip.

If you are referring to their latest results, then it's a bit hard to quantify that. Singtel biz is spread over several countries with the most significant impact coming from Singapore and Australia operations. For this Q, Singapore is +ve and the main -ve is coming from Australia side. Australia is -ve, mainly due to competition from Telstra, not due to their state of their economy. So, also hard to quantify.

As for the associates, altho' the analysts + news like to focus on the huge -ve at Bharti, if you really look at the numbers, it's actually not very significant (as a % of total Singtel biz). Further, this "huge" Bharti -ve is easily offset by other associates like Telkomsel...

BUT, if you're referring to their SHARE PRICE as a bellweather of Mr Market's moods, then yes, IMO, it's a good indicator...

Mr Market's moods are affected mostly by the following forward outlook statement, rather than the performance of the recent quarterly report IMO.

"With the revised revenue outlook for Australia, the consolidated revenue of the Group is expected to decline by low single digit level and Group Consumer and Mobile Communications revenues are both expected to decline by mid-single digit levels. However, Group EBITDA is expected to be stable, consistent with earlier guidance"

It helps for my collection recently....

[specuvestor]

I haven't been following Singtel closely the past 2 years but Bharti was like 1/4 of her profit. The other issue is also that it is PnL profit and not cash flow as Bharti had low dvd yield, hence constraining singtel's payout ratio.

On Optus IIRC Singtel bought it for $10b like 10 years ago. Optus is interesting because AUD is probably the only "asian" currency that appreciated against S$ in the past decade. Another way to look at it is how much this $10b is worth now if It had been placed in Aussie FD or 10 year aussie bond. The difference between the 2 would be the Economic Value Added for the purchase.

Just some food for thought.

[CityFarmer]

I haven't been following Singtel closely the past 2 years but Bharti was like 1/4 of her profit. The other issue is also that it is PnL profit and not cash flow as Bharti had low dvd yield, hence constraining singtel's payout ratio.

On Optus IIRC Singtel bought it for $10b like 10 years ago. Optus is interesting because AUD is probably the only "asian" currency that appreciated against S$ in the past decade. Another way to look at it is how much this $10b is worth now if It had been placed in Aussie FD or 10 year aussie bond. The difference between the 2 would be the Economic Value Added for the purchase.

Just some food for thought.

Airtel Bharti's post-tax profit is approx 10% of group net profit in FY2012. It reduces to 6% in YTD FY2013. Telkomsel's post-tax profit is approx 20% of group net profit consistently.

Let's look into Optus. So far, Optus had brought in free cash flow of approx S$1.0-1.5 billions annually to Singtel Group. It should be a much better option compare with Aussie FD

[hongonn]

While checking the Singtel account, saw this $10.9b of intangible assets. Is it due to the Optus acquisition? Shouldn't it be amortized over the years?

The premium paid for Optus shouldn't it go to goodwill? Does it impaired before? Or this intangible assets consists of something else?

Please advise. Thanks.

[hongonn]

Digging the annual report, out of the $10.9b intangible

Carrying value of goodwill in -
- Optus Group $9,575.9m

Singtel has since 2004 stop amortizing the goodwill. So this foolish thing done 11 years ago always leave a mark on book. Australia has only 22m population which is less than Malaysia.

Singtel has amortized Optus
2002 333.5m
2003 555.6m
2004 565.7m

Probably 20 years amortization of $10b which is $500m roughly. Almost 15% of current Singtel annual income.

I wonder could the goodwill amortization rule change because of Singtel? Just think wildly.

[specuvestor]

I haven't been following Singtel closely the past 2 years but Bharti was like 1/4 of her profit. The other issue is also that it is PnL profit and not cash flow as Bharti had low dvd yield, hence constraining singtel's payout ratio.

On Optus IIRC Singtel bought it for $10b like 10 years ago. Optus is interesting because AUD is probably the only "asian" currency that appreciated against S$ in the past decade. Another way to look at it is how much this $10b is worth now if It had been placed in Aussie FD or 10 year aussie bond. The difference between the 2 would be the Economic Value Added for the purchase.

Just some food for thought.

Airtel Bharti's post-tax profit is approx 10% of group net profit in FY2012. It reduces to 6% in YTD FY2013. Telkomsel's post-tax profit is approx 20% of group net profit consistently.

Let's look into Optus. So far, Optus had brought in free cash flow of approx S$1.0-1.5 billions annually to Singtel Group. It should be a much better option compare with Aussie FD

You probably didn't go back far enough then in FY2010 pre tax was S$978m and post tax S$848 for Bharti (page 40 of AR) Optus Net profit was S$676. Singtel profit that year was S$3.9b. That's how much Bharti had declined the past few years.

Where did you get the Optus FCF figure? You have to use same base currency to compare ROIC. For a simple comparison of Optus EVA refer to the link below.

hongonn I chanced upon this link which probably answers your question;
http://www.investmentmoats.com/stock-mar...nvestment/

[CityFarmer]

...
Where did you get the Optus FCF figure? You have to use same base currency to compare ROIC. For a simple comparison of Optus EVA refer to the link below.
...

In the AR10, page 34. The same info is available in all AR in "Group Five Years Financial Summary" page.