Singtel sees full-year Ebitda dip after posting 14% fall in Q3 profit


SINGTEL management lowered its expectations for the telco giant on Thursday, as third-quarter results showed another profit decline.

Full-year earnings before interest, tax, depreciation and amortisation (Ebitda) is now expected to see a year-on-year percentage drop in the low single digits, on a crunch in the core consumer and enterprise businesses.

Singtel had previously reaffirmed its forecast of a stable Ebitda in its half-year results last November.

But net profit has since fallen for the third quarter this year. Earnings were down by 14.2 per cent year on year, to S$823 million for the three months to Dec 31, 2018, as key associate Bharti Airtel sank into the red.

The slide came even as group revenue improved by 0.9 per cent to S$4.63 billion - tracking the growth in enterprise managed services, business solutions and equipment sales.

The lift from the Singapore enterprise business just about covered the slip in revenue from consumer operations here, as turnover from device sales, mobile services and home pay-television services all dropped.

Singtel's fledgling digital life business - which comprises ad platforms Amobee and Videology, and streaming service Hooq - saw double-digit revenue growth but stayed Ebitda-negative on losses from Videology, which was bought in August last year. The market seemed unfazed by Singtel's trimmed guidance, with DBS Bank analyst Sachin Mittal saying that "consensus has been overly bullish on Ebitda from Singapore and Australia".

RHB Securities Research said in a report that headwinds from competition persist in those core markets, "with management's more conservative guidance capping sentiment".

"We believe the market has largely priced in new guidance of softer group Ebitda," added Maybank Kim Eng analyst Luis Hilado in a report.

With stiff competition on home ground - network operator TPG Telecom arrived from Australia at end-2018 in a Singapore market already teeming with mobile virtual network operators (MVNOs) - Singtel consumer chief Yuen Kuan Moon said at a briefing that the incumbent is waiting for TPG to exit its pilot and unveil its charges.

"The current impact is really minimal. Once they announce the commercial rates . . . we will be able to assess how the market is positioning itself," he said, referring to prices.

He added that Singtel expects more MVNOs to set up shop later in the year and is in talks with some of the potential entrants. Its existing partners are Zero1 and Zero Mobile.

Stock watchers are unimpressed by Singtel's latest quarter, with OCBC Investment Research analyst Joseph Ng calling the results "broadly under our expectations".

Mr Hilado said: "Assuming no further escalation, value is in fact emerging in the stock. The timing of catalysts, however, remains murky."

Bharti Airtel bore the brunt of the blame - contributing a post-tax share of loss of S$77 million, after a share of profit of S$37 million the year prior. Still, Singtel international head Arthur Lang described the group as "cautiously optimistic" about the cut-throat South Asian market.

Contributions were also down at regional associates Telkomsel in Indonesia, as well as AIS in Thailand.

Citi analyst Arthur Pineda said in a note that "the main point of challenge lies with the offshore associates".

But he added that stabilisation may be under way and Telkomsel appears to have bottomed out. This was in line with the opinion of group chief executive Chua Sock Koong - that Singtel's long-term view on these associates is still positive.

"We expect the regional markets to revert to more sustainable market structures and deliver long-term profitable growth," she said in a statement.

DBS' Mr Mittal, who has a "buy" call on Singtel with a price target of S$3.50, advised punters to "accumulate Singtel on any weakness - Bharti comes free".

Singtel shares were flat at S$3.03, after the results were announced.

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