Based on the associates’ results trend, the analyst expects Singtel’s FY2024 core earnings to be 3% below his expectation. However, he sees limited risk to DPS expectation of 11.8 cents for FY2024 (2HFY2024 DPS of 6.6 cents), translating to an attractive 5.5% annualised dividend yield.
This DPS expectation is slightly below Bloomberg consensus of 12.4 cents. “Based on our reading of associates’ delivery, assuming Singtel misses earnings by 3%, it can still meet our DPS expectation at a dividend payout ratio of 87%. To meet street DPS expectations, the payout ratio has to be about 91% and as such we see slight downside to the street’s FY2024 DPS expectations,” says Saifee.
Singtel’s official payout ratio is 70-90% of core earnings while management has indicated it expects to pay at the higher end of the range. The group’s balance sheet remains in a strong position with cash balance further boosted by the recent Bharti stake sale.
Associates driving FY2024 earnings
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AIS’s core profit of THB 8.6 billion grew 28% y-o-y, 22% q-o-q and was 20% higher than Maybank’s forecast and consensus. Earnings growth was helped by strong costs control and should dispel any concerns about 3BB-acquisition-led earnings dilution.
Bharti’s core earnings grew 14% y-o-y, 18% q-o-q. Bharti’s India and South Asia revenues/EBITDA grew by a firm 13%/14% y-o-y, but partially offset by decline in Africa revenues/EBITDA owing to currency devaluation.
Telkomsel’s 1QFY2024 core earnings increased 18% y-o-y, 5% q-o-q, helped by Indihome-integration-linked synergies.
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Globe’s core earnings grew 13% y-o-y, 35% q-oq-q, helped by a firm mobile revenue growth of 8% y-o-y and expanding GCash profitability (up 138% y-o-y and contributes 17% of Globe’s core earnings).
As at 11.50am, shares in Singtel are trading at $2.44.
