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Singtel Quarter 1 2011 Analysis

SingTel announces a set of weaker Q1 profit statements despite growing to a larger subscriber base.

[Data Here >]

Here are some key takeaways from the announcement.

  1. Group EBITDA stayed largely the same. However EBITDA margin weakens from 29% to 27.9%. Net Profit overall was lower due to mainly taxation increases.
  2. Quarterly EBITDA Margins for Singapore Telco weaken by 4.2%. This is attributed to investments in mio TV content and strategic initiatives to grow new businesses. We will see whether this is a continuous trend.
  3. Quarterly EBITDA Margins for Optus gained by 8.6%
  4. Competition is intense for Optus in Australia.
  5. A Strong Australian dollar boosted Optus profits by 10% from a year ago.
  6. AIS in Thailand and Globe in Philippines have achieved good growth even though their contribution to group EBITDA have been small.
  7. Quarterly EBITDA Margins and figures for Telkomsel have increased. However due to depreciation of Rupiah and higher depreciation due to network expansion and the shortening of useful life of certain facilities, profit for Telcomsel have been lowered.
  8. Bharti remains the weak link for Singtel. Higher 3G rollout cost, higher licence fee amortization, a quarter of losses from Africa operations and 10% depreciation of Indian Rupee have resulted in a 27% profit reduction.
  9. Group Operating Cash Flow was higher than last year but lower than last quarter. The 11% fall was due mainly to seasonality in the timing of payments including annual staff incentive paid.
  10. Group received a higher dividend from associates which was mainly attributable to the timing in receipt of Telkomsel’s dividend.
  11. Capital Expenditure rose 23% YoY due to milestone payments for Singapore’s ST-2 satellite.
  12. Overall Group Free Cash Flow was weaker than last quarter due to higher capital expenditure and changes in operating assets and liabilities.
  13. Net Debt position improved but only marginally from 5.5 bil to 5.3 bil. We do expect this to stay largely the same.
  14. Interest Cover stayed largely the same at 20.6 times EBITDA.

Overall, I see this as a set of weaker result. Free Cash Flow worsen due to higher capital expenditure and the inability of Optus, Bharti to perform well.

We need to find out if the higher capex is here to stay. The estimated full year capex will be 2.4 bil. Estimated full year operating cash flow will be 6 bil. Estimated free cash flow to then be 3.6 bil.

We do expect to see a 2.55 bil dividend payout and at price of $2.95, dividend yield works up to 5.36%

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