The way Foong sees it, better associate earnings and narrower Group Digital Life (GDL) losses will help offset earnings pressure from Singapore consumers, Group Enterprise (GE) and a weaker Australian dollar in FY20F.
“Singtel sees Group Digital Life (GDL) losses narrowing in FY20F on higher EBITDA at Amobee, driven by high single-digit growth in net revenue and narrower HOOQ losses,” Foong says.
Meanwhile, in Indonesia, overall competition is improving for Telkomsel, which accounted for 30% of Singtel’s FY19 core net profit.
“Recently, [Telkomsel] carried out some tariff increases around Lebaran and saw other players following suit. While Telkomsel sees prices coming back down post-Lebaran, management says it may look into further price revisions a few weeks later – depending on the spending reaction by subs to the tariff hikes during Lebaran,” Foong says.
The brokerage is keeping its “add” recommendation on SingTel, and raising its target price by 3% to $3.50.
Foong says the higher target price comes after factoring in more optimistic consensus forecasts and valuations for Bharti Airtel and removing a previous 20% valuation discount as the Indian market is stabilising.
“Bharti Airtel believes that revenue has bottomed out over the past 9-10 months and that there is upside potential to ARPU of close to Rs200 a few years ago,” says Foong.
“However, in the near-term, it believes prices will likely be maintained until Vodafone-Idea reaches market share equilibrium and is able to manage merger/integration challenges,” he adds.
As at 3.20pm, shares in SingTel are trading down 0.9% at $3.32. This implies a price-to-earnings (PE) ratio of 19 times and a dividend yield of 5.2% for FY20F.
