SingTel Earnings: Weak Australian Dollar Offset by Lower Depreciation and Interest Expenses

Shares in SingTel are fairly valued.

Morningstar 22.08.2023
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SingTel Stock at a Glance


SingTel Earnings Update

We maintain our fair value estimate for narrow-moat Singtel at SGD 2.52 following the release of first-quarter results. Revenue was slightly lower than our expectations, but profits were above them. SingTel’s first-quarter fiscal 2024 operating revenue declined 2.7% year on year with EBITDA down 7.7% year on year. Assuming constant currencies, revenue would have been up 2.5% and EBITDA down 3.1%. Note, underlying net profit rose 19.9% mainly on the back of significant reductions in depreciation and net interest expense.

Our fair value estimate implies a price/earnings ratio for Singtel of 19 times, which is slightly ahead of its average over the past 10 years. On our valuation, the associate businesses are worth around 80% of the total value of Singtel with the remainder from Singtel’s consolidated Singapore and Australian businesses. Our forecasts assume a fiscal 2024 dividend of 10.1 cents per share, which would imply around 4% dividend yield.

The Singapore domestic business reported that operating revenue was down 1.8% year on year, after growing 3.4% for full-year fiscal 2023, with EBITDA stable. The Singapore mobile business reported flat mobile services revenue year on year, which is well behind the 13% growth reported by StarHub so it looks like SingTel lost market share. SingTel’s pay TV revenue declined by 21% year on year, with StarHub reporting a big increase in pay-TV revenue over the same period as StarHub purchased the English Premier League rights. The pretax contribution from the associates was up 7.9%, driven by Bharti’s Indian and South Asian operations, with profit up over 113%. We forecast SingTel’s domestic business to grow its EBITDA at around 2% per year over the next five years.

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