OCBC on SingTel

Singapore Telecommunications Ltd: Better profits driven by associates

Singapore Telecommunications Limited (SingTel) released its 3Q06 results with revenue at S$3.36bn, up 4.2% YoY, but operational EBITDA fell 5.4% YoY to S$1.12bn. Cost escalation was to blame, however, at the underlying profit level, SingTel's results were much better at S$778m, +4.1% YoY, and beating market estimate of S$755m by about 3%. The better bottom-line performance was due to SingTel's regional mobile associates' sterling performances, with total contribution of S$412m, up 35% YoY or making up about 40% of Group's pre-tax profit. Telkomsel was the most important contributing member with more than half of the total at about S$230m and Bharti came in at a far second with S$72m. The investment case for SingTel remains its strong cash position and its ability to reward its investors handsomely. We estimate 18 cents dividend is possible. Finally, we see SingTel as a potential laggard play and could re-rate if market continues to rise. We maintain our BUY rating and fair value of S$2.88. (Winston Liew)