Tag Archive | "Singtel"

SingTel Z74.SI’s Latest Amobee Acquisition

SingTel Z74.SI’s Latest Amobee Acquisition
adapted from sharesinv.com

When the largest market capitalisation company on our local bourse announces an acquisition bid, especially one that is its first major overseas acquisition since 2007, it is little surprise that analysts are scrambling behind their research desks making sense out of the news.

On 5 March, Singapore Telecommunications (Z74.SI) announced that it has signed an agreement to acquire US-based Amobee for approximately US$321 million. Separately, the telco unveiled a new organisation structure that entails three units – Group Consumer, Group Digital Life and Group ICT – to adapt to the changing industry landscape and business focus.

Without a doubt, focus of the announcement was the Amobee acquisition. The target is a mobile advertising solutions provider that is founded in 2005, with current customers including prominent technology players such as Ebay, Google, Skype, Zynga and etc. Through this deal, SingTel hopes that its capabilities in the fast-growing mobile advertising and marketing industry can be strengthened.

Following the announcement, research houses have largely issued positives. Phillip Securities viewed the acquisition as ‘a move in the right direction’, highlighting that SingTel is the industry leader in the mobile market and will be able to leverage on its vast network of more than 400 million mobile subscribers for this new business. The house noted that profitability of the local telcos has been eroded by high handset subsidies, in consequence from their aggressive effort to drive smartphone penetration. Hence, this deal presents an opportunity for SingTel to monetise its earlier investments. Accordingly, Phillip maintained its ‘Accumulate’ rating and target price of $3.31.

However, one research house has stood at the other end and downgraded its rating to ‘Sell’ from ‘Hold’. Though acknowledging that the acquisition is far-reaching in its implications for the future and the orgainsational restructuring is broad in scope, Kim Eng termed the development as ‘fail to impress’. The house is cognizant that these initiatives would only bear fruit in the longer-term, while SingTel’s already-challenged margin could be squeezed in the short-term due to a spike in operating costs. In addition, though the US$321 million acquisition tag is well-affordable and thus unlikely to affect the telco’s dividend, this may be a prelude to more acquisitions which could compromise its dividend paying capacity. Together with the rating downgrade, Kim Eng reduced its target price to $2.80 from $2.95.

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SingTel reports unexpected drop in profit on regional units

Singapore Telecommunications, Southeast Asia’s biggest phone company, reported an unexpected drop in first-quarter profit as costs cut earnings at home and currency gains crimped income from regional businesses.

Net income fell 2.9% to $916.2 million, or 5.7 cents a share, in the three months ended in June from $943.2 million, or 5.9 cents, a year earlier, SingTel said in a statement today. Analysts had expected profit would rise to $991 million, according to the average of three estimates compiled by Bloomberg.

Six consecutive quarters of lower earnings at affiliate Bharti Airtel, India’s biggest mobile-phone operator, and the Singapore dollar’s appreciation against nine major Asian currencies this year are crimping overseas income. Earnings from the Optus unit in Australia are rising, boosted by currency gains and customers won from rivals, while program content costs at its mioTV Internet protocol service cut profit at home.

“The currency is destroying all the fun and clearly the risk of translating those earnings is going up,” said Theo Maas, who holds SingTel stock among the $5.4 billion he helps manage at Arnhem Investment Management Pty. in Sydney. “We’ve been seeing those trends for mioTV for three of four quarters now and the margins in Singapore were disappointing.”

SingTel declined 2% to US$2.89 as of 11:04 a.m. on the Singapore exchange, poised for their lowest close in almost five months. The stock was the third-biggest contributor to the 1.6% drop in the Straits Times Index today. The shares have fallen 1.9% this year, compared with a 13% decline in the benchmark.

AUSTRALIAN GAINS

International associates such as Bharti in India and Africa, Telkomsel in Indonesia, Advanced Info Service Pcl in Thailand and Globe in the Philippines, contributed $472 million to earnings, down 10% from a year earlier.

Earnings before interest, tax, depreciation and amortization from Singapore operations fell 4% to $567 million on mioTV costs. Revenue rose 2%.

Income at Sydney-based Optus, Australia’s second-largest phone company, rose 1% to A$560 million ($696 million) after the company added mobile customers.

Optus and larger rival Telstra Corp. are both winning customers from third-ranked Vodafone Hutchison Australia, which last week reported the loss of 375,000 users in the six months to June amid a rise in dropped calls and complaints.

Telstra, Australia’s largest telephone company, today reported second-half earnings that beat analysts’ estimates after winning more mobile-phone customers and cutting costs.

TELSTRA EARNINGS

Net income was A$2.04 billion in the six months ended June, compared with the A$1.81 billion average forecast in a Bloomberg survey of three analysts’ estimates, as the Melbourne-based company added customers at a faster pace than Optus.

Telstra added 1.66 million new users in the past 12 months, compared with 408,000 new mobile customers at Optus.

Telstra shares rose as much as 5.7%, the biggest gain on an intraday basis since Nov. 25 and were trading 5% higher at A$2.97 as of 12:47 p.m. in Sydney.

SingTel, which owns minority stakes in six operators with businesses across 25 countries, has 416 million mobile phone customers, the company said in the statement.

In addition to its wholly owned units in Australia and Singapore, the company has stakes in operators in India, Pakistan, Bangladesh, Thailand, the Philippines, and Indonesia.

“Our Singapore and Australian businesses continue to perform well, especially in the mobile segments,” Chief Executive Officer Chua Sock Koong said in the statement. “Geographical diversity helped reduce the impact of foreign exchange volatility.”

New Delhi-based Bharti, of which SingTel owns a stake, last week reported a 27% drop in quarterly profit amid higher borrowing costs and the start of new services.

Earnings from PT Telekomunikasi Selular Tbk in Indonesia, dropped 4.8% in Singapore dollars even as profit in local currency terms rose 1.1%.

Adapted from i3investor.com & Bloomberg.

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SingTel pays record dividend as acquisition avenues dim

Singapore Telecommunications (SingTel) set a surprise record dividend payment, signalling Southeast Asia’s biggest telecoms company was struggling to find growth avenues through acquisitions.

And in a sign that it could return more capital to shareholders, Singapore’s most valuable company said it was setting up a business trust to transfer some of its infrastructure assets. Trusts usually pass on most of their income to their unitholders as dividends.

“In the near term they probably just have to return more cash to the shareholders. They have said they will keep looking for other opportunities but I think in the short term it is going to be difficult,” Credit Suisse analyst Sean Quek said.

SingTel bought stakes in mobile operators in high-growth Asian countries such as India, Indonesia and Thailand about a decade ago to boost growth and reduce its reliance on the mature Singapore and Australian markets.

But with business in some of these emerging markets maturing and competition intensifying, the profits of some of these units have come under pressure.

A steep fall in contribution from its Indian unit Bharti Airtel drove a 2.3 percent drop in SingTel’s fourth-quarter net profit on Thursday.

The company set a final ordinary dividend of 9 Singapore cents and a special dividend of 10 Singapore cents, bringing the annual dividend to a record 25.8 cents per share, or a yield of 8 percent based on its recent share price.

“Since we have not made significant acquisitions in the last few years, in an attempt to get into the optimum capital structure, we proposed this special dividend,” SingTel’s CEO Chua Sock Koong said at a media briefing on the results.

“And it does not inhibit our ability to make acquisitions going forward,” she added.

SingTel said it was setting up a business trust to hold some of its assets such as manholes, ducts and central offices that will form part of Singapore’s net generation nationwide broadband network.

It will reduce its stake in the trust to less than 25 percent by April 2014, which may mean more payouts for shareholders in the future.

The dividend news helped SingTel shares rise as much as 1.3 percent on Thursday. By afternoon, they were up 0.6 percent, bucking the 1.1 percent decline in the broader Singapore market .

DRAG FROM BHARTI

SingTel reported an attributable net profit of S$991.7 million ($802 million) for January-March, down from S$1.02 billion a year ago, and in line with the average forecast of S$991 million from four analysts polled by Reuters.

Revenue for the company, which has a market value of $40 billion, rose 3.8 percent to S$4.6 billion.

Bharti posted a bigger-than-expected 31.5 percent fall in its quarterly net profit and said its loss-making operation in Africa, which it bought last year from Kuwait’s Zain for $9 billion, is expected to dent near-term earnings. [ID:nL3E7G40KL]

Contributions from Bharti, India’s top mobile phone carrier in which SingTel has around a 32 percent stake, fell by 29 percent in Singapore dollar terms to S$173 million.

SingTel CEO Chua said in November the Indian unit will take at least another two quarters to restructure the African operation. [ID:nSGE6A80EA]

PT Telekomunikasi Indonesia (Telkomsel), which has become the biggest contributor outside Singapore and Australia, has seen its margins fall due to tougher competition in the world’s fourth most populous nation.

Weakness in regional currencies against the Singapore dollar also weighed on SingTel’s quarterly profits.

SingTel said revenue for its Singapore and Australia operations was expected to grow in the low single-digit level for the year ending March 2012. Earnings before interest, tax, depreciation and amortisation is expected to be stable for the Singapore operation and grow at low single-digit levels for Australia, it said.

SingTel also said it is eyeing opportunities arising from the introduction of high-speed broadband networks in Singapore and Australia.

Singapore state investor Temasek Holdings controls 55 percent of SingTel, which competes with StarHub and MobileOne in mobile phone services, high-speed Internet and pay-TV in the city-state. ($1 = 1.236 Singapore Dollars) (Additional reporting by Adrian Bathgate in Wellington; Editing by Muralikumar Anantharaman)

Adapted from Reuters.

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Impact of Japan quake on Singapore stocks limited

Singapore Market Strategy: Impact of Japan quake on Singapore stocks limited
Summary Impact of Japan quake on Singapore stocks limited

Following Japan’s 8.9-magnitude earthquake and the subsequent tsunami, widespread damage has been reported and a nuclear power plant in Fukushima has also encountered radiation leaks. Japan’s Economic and Fiscal Policy Minister Kaoru Yosano said the economic impact will exceed the JPY20t (US$243b) in the damage sustained in the 1995 Kobe earthquake. In this report, we examine its impact on SGX-listed companies.

Amongst the STI constituent stocks under our coverage, SIA’s (BUY, TP:S$17.20) impact is probably larger than the rest. SIA has a high flight capacity exposure (Nagoya, Osaka, Fukuoka and Narita), which could face a risk of poor load factor. While management has yet to disclose the exact capacity exposed in its Japanese routes, we estimate that SIA risks recording low load factor for 15%-18% of its total capacity. For Tiger Airways (BUY, TP:S$1.65), a budget airline, we do not expect any negative impact from the Japan quake as it currently does not operate any flights to Japan. In fact with the catastrophe in Japan, tourists will be deferring their holiday plans there hence there may likely be an increase in travel to other destinations which Tiger services.

The impact is minimal for most of the other sectors.

The Singapore banks are primarily exposed to the ASEAN and HK markets and have minimal exposure to Japan.
As for the oil & gas segment, Keppel Corp (BUY, TP:S$13.94) has a stake in a Japan unit involved in fabrication and supply of specialized steel parts, but this unit’s earnings contribution share to Keppel is insignificant.
The REITS under our coverage have no significant assets in Japan, except for ParkwayLife REIT, which has some exposure in Japan (33% of portfolio value), but most of their properties are located in regions which are relatively less affected by the earthquake, and none are within the evacuation zones of the nuclear plants.
Small impact on commodity counters. Noble (BUY, TP:S$2.58) and Olam (BUY, TP:S$3.70) have little exposure to Japan. Straits Asia Resources (SAR) (NEUTRAL, TP:S$2.49) sells coal to Japan and coal power as an alternative to nuclear could lead to higher coal prices, a positive for SAR.
Negligible impact on telcos. Singtel (NEUTRAL, TP:S$3.00) has the largest proportion of mobile revenue coming from roaming at 20-25% but Japan is not a key contributor in terms of outbound roaming revenue.

adapted from DMG research

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