Telkomsel’s profit decline due to fair value revaluation, says Singtel as shares fall after Citi report
SINGTEL on Thursday (Aug 3) sought to assuage concerns over its profitability, after analysts from Citi flagged potential downside from recent softness in Indonesian associate Telkomsel, sending the group’s shares down 6.8 per cent on Wednesday.
Singtel said that Telkomsel’s 21 per cent year-on-year decline in net profit was driven mainly by fair value revaluation of its investment in consumer Internet company GoTo. GoTo’s fair value losses or gains are booked directly in the balance sheet, Singtel said.
Any negative impact of the fair value adjustments on Telkomsel’s net profit will not be reflected in Singtel’s net profit or underlying net profit, which Singtel’s dividend policy is based on.
The group reiterated its guidance for dividends from regional associates, which are expected to be about S$1.3 billion in FY2024.
Telkomsel’s net income for the second quarter ended Jun 30 fell to 5.41 trillion rupiah (S$476.2 million) from 6.82 trillion rupiah, according to results posted by Telkom.
Excluding the fair value of the GoTo investment, Telkomsel would have reported a 1 per cent year-on-year increase in net profit, said Singtel on Thursday.
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On Tuesday, Citi analysts Arthur Pineda and Luis Hilado opened a “30-day negative catalyst watch” on Singtel, with potential downside to the research team’s and consensus estimates for the first quarter 2024 net profit after tax.
Citi estimates that Telkomsel will generate 24 per cent of Singtel’s pre-tax profit for FY2024. It said that unexpected softness could weigh on Singtel’s overall Q1 2024 profit outlook.
Singtel’s counter neared a two-month low to close at S$2.46 on Wednesday, down 6.8 per cent or S$0.18. The last time Singtel’s shares closed at this level was Jun 13.
The shares slid further to close at S$2.41 on Thursday, down S$0.05 or 2.03 per cent.
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