Digital advertising arm Amobee achieved positive EBITDA of $11 million for the very first time, supported by contribution from recently acquired Turn. Overall, Group Digital Life segment, which also includes HOOQ and DataSpark, had EBITDA losses narrowing 50% y-o-y to $14 million.
DBS analyst Sachin Mittal says Singtel’s ICT and digital growth business comprises about 25% of the telco’s revenue and may comprise over 40% in five years. Infocomm Technology (ICT) made up 19% while Group Digital Life accounted for 6% in 2Q18. With double-digit growth, these businesses could easily contribute over 40% of Singtel’s revenue in five years organically.
“We use a sum-of-the-parts (SOTP) valuation for Singtel to derive a target price of $4.30. The stock offers about 14% upside potential in addition to a 5% yield,” says DBS analyst Sachin Mittal.
Similarly, OCBC remains positive over Singtel’s longer-term outlook given its focus to grow its cybersecurity, ICT solutions capabilities, digital advertising and other digital-related businesses.
As Singtel continues to drive investments to further enhance its ICT capabilities as it builds up its ICT-related business portfolio, OCBC analyst Low Pei Han expects the proportion of ICT-related revenue in its enterprise segment to continue to rise.
However, Low expects muted performance over the near-term as its consumer business faces headwinds in both the Singapore and Australia mobile markets amid intensifying competitive landscape. Contributions from associates will remain fairly weak as Airtel’s weakness persists.
OCBC is maintaining its "buy" with unchanged fair value of $4.19.
UOB KayHian analyst Jonathan Koh also notes that earnings contribution from regional mobile associates dropped 7.2% y-o-y.
Revenue from Telkomsel increased by a slower 4% y-o-y due to a high base created by Ramadhan festivities during Jul 17 and a 6% y-o-y decline for voice revenue. Contributions from Telkomsel grew marginally by 1.7% y-o-y dampened as the rupiah depreciated 1.9% q-o-q.
Bharti Airtel suffered severe price erosion due to competition from new entrant Reliance Jio, and saw ARPU decline 23% y-o-y to Rs145 ($3.03). It managed to add 1.4 million mobile subscribers in India. EBITDA from Africa increased 41% y-o-y due to cost control initiatives. Overall, contributions from Bharti Airtel declined 51.8% y-o-y.
Last month, Optus became the first telco in the world to deploy three-channel massive MIMO in Sydney, achieving data throughput of 800Mbps. It will roll out the latest antenna technology to other capital cities over the next six months. Koh says the enhancement of coverage and capacity would ensure that Optus is able to maintain its market share if competition intensifies.
Shares in Singtel are up 2 cents at $3.78 or 10.6 times DBS' FY18 earnings.
