We expect Bharti and Telkomsel to drive Singtel earnings growth

While we believe SingTel faces challenges in Singapore with the upcoming Next Generation National Broadband Network (NBN), we are positive on SingTel’s associates, Bharti Airtel (Bharti) in India and Telkomsel in Indonesia. We expect these associates to drive a 9% net profit CAGR for SingTel for the next five years.

In mid-2008, the A$, Rp, and Rs depreciated significantly versus the S$, pressuring SingTel’s YoY earnings trend as contributions from overseas associates became smaller in S$ terms. We think the YoY comparisons should no longer be a concern from mid-2009, as the A$, Rp, and Rs have now appreciated versus the S$.

Over the past three months, SingTel has been the worst performing large-cap stock in Singapore. SingTel underperformed the Straits Times Index (STI) by 26% as investors focused on high beta names. We believe the period of SingTel’s underperformance may largely be over as currency risks are subsiding.

Reflecting Bharti and Telkomsel earnings upgrades and recent currency moves, we raise our SingTel FY2010/11E EPS from S$0.237/0.252 to S$0.244/0.268. We also raise our price target from S$2.94 to S$3.38. SingTel’s 12-month forward PE is at 11.9x, and the implied 12-month forward EV/EBITDA multiple for SingTel’s Singapore and Australia businesses is 5.1x. These are below the five-year historical average of 12.7x PE and 6.0x EV/EBITDA.

Sponsored Links

Related Posts by Categories