Singtel - Likely to Provide Good Support

Solid 4Q, guidance in line. Better-than-expected operational performance in Singapore and Australia drives 4Q results ahead of our top-of-the-Street views. Guidance into FY10 is line with expectations though. All in all, these results are likely to provide good support to stock that has been up 10% in last ten days.

4Q results detail. Recurring profits of S$942m (-3.0% yoy) was higher than our top-of-Street S$924m view. EBITDA of S$1.15bn (flat yoy) was higher than our S$1.06bn view. Associate contributions at S$531m (-20yoy, +6%qoq) were in line with our S$536m view. Final DPS at 6.9cents, in line with CIRE of 6.9cents.

FY10 guidance – no surprises. (1) Singapore: single digit top line growth; margin down to 36-38% (39% in FY09): CIRE at 5.3% rev, 2.5% EBITDA growth on 36.3% margin. Capex of S$800m (we are at S$730m); (2) Optus – low single digit operating rev and EBITDA growth (CIRE at 4.7% rev, 3.5% EBITDA growth), S$1.1bn capex in line; associates – Bharti, T’sel highlighted as growing LCY earnings (CIRE at 24.5% associate growth off low FY09 base).

Singapore: good all-round numbers. 6% organic top line growth (despite weak economy) is a positive and highlights SingTel continues to take share. S$563m of EBITDA also higher than our S$529m view on good cost controls.

Optus: higher mobile margins drive higher EBITDA. Higher mobile margins (31.5% in 4Q versus 27% 9M YTD) saw 8.5%yoy EBITDA growth in 4Q to S$584m (CIRE A$530m). The revenue-share enhancement versus margin trade-off should continue into ’09 as evident from “low single digit” EBITA growth guidance into FY10; we should not see this margin increase as permanent.

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