“We think 3QFY2022 Singapore consumer EBIT jumped 28-35% y-o-y (up 20-27% q-o-q), despite lower Job Support Scheme (JSS) credits, driven by increased uptake of higher average revenue per user (ARPU) 5G plans, some recovery in roaming and higher device sales,” says Foong and Low in a Feb 9 report.
On the flip side, the analysts reckon the group enterprise EBIT (including NCS and Trustwave) will ease about 5-11% y-o-y, mainly due to lower JSS credits and NCS’s big recruitment drive. Meanwhile, they see Amobee’s LBIT at $10-15 million, up y-o-y from 3QFY2021’s $4 million (boosted by US elections) but steady q-o-q.
As for Optus, the analysts think that 3QFY2022 consumer EBIT will drop by 25-30% y-o-y, as lower NBN migration revenue, plus higher staff cost and depreciation, more than offset higher mobile revenue (stabilising competition); nonetheless, the figure could be 25-33% higher q-o-q due to continued good traction for Optus’s Choice plans, more stable competition plus seasonally stronger device sales.
Additionally, the analysts are upbeat on Singtel’s ex-Singapore regional associates, as they foresee profits from this segment climbing 31-34% y-o-y, led by a turnaround in Bharti’s contribution to $45-50 million, due to higher subscriptions, ARPU and EBITDA margin, as well as better Telkomsel and Globe earnings.
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Separately, Singtel has recently executed a joint development agreement (JDA) with Gulf Energy Development and Advanced Info Service (AIS) to jointly develop and operate data centres (DCs) in Thailand. This JDA follows a previously inked memorandum of understanding (MOU).
RHB Group Research is positive on this deal as it has kept its “buy” recommendation and target price of $3.37, while maintaining the stock as its preferred pick for exposure to Singapore telcos.
This deal forms part of its strategic business reset announced in May 2021 to unlock the value of infrastructure assets and to focus on the Asean business-to-business (B2B) segment. The research house notes that the prospects of the regional DC business are bright with a projected 2020-2025 CAGR of 18% (DC market size of US$5.7 billion in 2025), according to Frost & Sullivan. Here, the Thai and Indonesia markets present the largest growth opportunities with a CAGR of 28%, says RHB.
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Meanwhile, RHB is keeping an eye on Singtel as the group has announced that it is also looking to ink a similar partnership in Indonesia with Telekomunikasi Indonesia. Domestically, the group is adding 30-40MW DC capacity to be ready in three to four years. Overall, the expansion of the DC footprint and capacity are expected to more than double existing DC capacity of 70MW to about 170MW in the next three to five years.
As at 12.55pm, shares in Singtel are trading at $2.55 or 20.11 FY2022 earnings with a dividend yield of 3.7%, according to CGS-CIMB’s estimates.
Photo: Bloomberg
