Singapore Telecom
Feb 9 close: S$2.60
MERRILL LYNCH, Feb 8
THE stock is trading broadly in line with our $2.62 per share valuation. While we see continued strength in the mobile associates, we are concerned that negative earnings momentum in the core businesses of Optus and Singapore domestic operations may weigh on the stock price in the short term.
SingTel's Q3 pre-abnormal profit after tax of $778 million was broadly in line with our forecast of $783 million.
We have made only slight changes to our forecasts for FY06, but have lowered our FY07 net profit after tax forecast by 2.4 per cent due to an increased forecast tax rate and decreased earnings before interest tax depreciation and amortisation (Ebitda) forecasts for both the Singapore domestic business and Optus.
On a medium to long-term basis, we have lowered our Ebitda forecasts on Optus, given the tough stance being taken by Telstra on wholesale prices and as there are no signs of any easing in competitive pressure in the Australian telecoms market. This has been offset by a lift in valuation of SingTel's 35 per cent stake in Telkomsel from $7 billion to $9 billion, leaving our discounted cash flow valuation of $2.62 per share unchanged.
We expect the company to update the market on its capital management plans at the FY06 results release in May. A 10 cent per share special dividend is not out of the question, in our view.
NEUTRAL
MERRILL LYNCH, Feb 8
THE stock is trading broadly in line with our $2.62 per share valuation. While we see continued strength in the mobile associates, we are concerned that negative earnings momentum in the core businesses of Optus and Singapore domestic operations may weigh on the stock price in the short term.
SingTel's Q3 pre-abnormal profit after tax of $778 million was broadly in line with our forecast of $783 million.
We have made only slight changes to our forecasts for FY06, but have lowered our FY07 net profit after tax forecast by 2.4 per cent due to an increased forecast tax rate and decreased earnings before interest tax depreciation and amortisation (Ebitda) forecasts for both the Singapore domestic business and Optus.
On a medium to long-term basis, we have lowered our Ebitda forecasts on Optus, given the tough stance being taken by Telstra on wholesale prices and as there are no signs of any easing in competitive pressure in the Australian telecoms market. This has been offset by a lift in valuation of SingTel's 35 per cent stake in Telkomsel from $7 billion to $9 billion, leaving our discounted cash flow valuation of $2.62 per share unchanged.
We expect the company to update the market on its capital management plans at the FY06 results release in May. A 10 cent per share special dividend is not out of the question, in our view.
NEUTRAL
posted by SmartYInvestor at 6:09 AM
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