Is this the turning point for SingTel?

Is this the turning point for SingTel?

Singtel telco

The Singtel Group is Asia’s leading communications group, which provide a diverse range of services including fixed, mobile, data, internet, TV, infocomms technology (ICT) and digital solutions.

Recent news: Singtel hires three banks for share sale of fibre broadband unit

“Singapore Telecommunications, the city-state’s largest phone company, said it has hired three banks as it prepares for an initial public offering to divest more than 75% of its wholly-owned fibre broadband network unit NetLink Trust.

Morgan Stanley, UBS Group AG and DBS Group Holdings are the advisers on the share sale, Singtel Chief Executive Officer Chua Sock Koong said at a briefing on Thursday. The company said it’s too early for details on the size or pricing of the proposed offering.

Singtel intends to meet the April 2018 deadline set by the regulator to reduce its stake in NetLink Trust to less than 25%, the company said. It may use the proceeds from the share sale for capital management and investments, and could return any excess capital to shareholders, Chua said.

Profit contributions from NetLink Trust, along with its Indonesia and Philippine investments, helped offset declines from Thailand and India in the fiscal third quarter ended Dec. 31, according to a statement to the Singapore Exchange. Net income contribution from NetLink Trust increased 42% to $32 million.

NetLink Trust’s operating revenue and earnings grew at double-digit on increased fibre penetration in Singapore. The unit has 79% of Singapore’s residential wired-broadband market.

Singtel shares have climbed 6.6% this year, compared with the 7.2% gain in the benchmark Straits Times Index.” – Refer to the full article here.

 

Key Financial highlights

With the above as a backdrop, here’s a quick summary of the latest financials from SingTel:

1) For the Quarter Ended 31 December 2016 (Q3FY2017), its group operating revenue decline 1.54% to $4410m compared to the same period one year ago. However, the net profit gained a YOY growth of 2% to $973m, which is mainly distributed by regional mobile associates.

2) The profit attributable to shareholders was up by a 1.8%, consistent to the growth of net profit, to $966.8m. Meanwhile the earning per share witnessed a increase of 5%.

3) For the nine months ended 31 December 2016, the group managed to double their cash and cash equivalents, with a 12% rise in FCF. Under the circumstance of stable cash flow from operating activities, the increase of cash flow is mainly distributed by the proceeds from term loans.

4) For the segments, SingTel maintain its local leading position, with steady growth of revenue and pre-tax profit in Singapore area. However, the operation in Australia met a down of 7% on reported revenue due to the sharp decline of mobile service revenue in the market.

5) But, the amount of unsecured borrowing witness a significant increase from $595.5m in Mar 2016 to $3087.3m in Dec 2016, with a growth rate of 418%.

(Source: Q3Y2017 Financial reports released by SingTel on 9 Feb 2017)
Refer to 3Q Results here.

To sum up the performance of SingTel for the third quarter of its fiscal year, SingTel met a decline in revenue because of the loss in foreign market but it maintains leading position in local area. The IPO of Netlink Trust in the near future bring SingTel optimistic expectations from investors due to the attractive dividend payout. However, investors should pay attention to the effect brought by increasing net borrowing to the solvency.

singtel shop

While SingTel observed the price over $4 on 17 Feb 2017, will the uptrend continue, is it the point that investor should expect a new up-wave?

Here’s why Singtel is worth looking at according to our community:
According to @JeremiahYeo,

DBS Bank says the Singaporean telco’s undervalued digital business and potential IPO of Netlink subsidiary create a buying opportunity….Broker’s take: Singtel’s digital business undervalued, DBS sees buying opportunity.

…refer to original post for more details.

Some positive catalysts for Singtel:
As @Dividend_Warrior puts it,

“1. Potential massive Netlink Trust IPO in 2H2017 which would means a juicy one-time special dividend payout. 2. Able to maintain FY2017 dividends in contrast to significant dividend cuts from Starhub and M1…”.

refer to original post for more details.

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