Slowing growth momentum. Excluding the adverse impact of Rs 3.6bn from MTC, revenue would have expanded 21% yoy and 5% qoq. This, however, is still a far cry from the 40-60% yoy growth seen in the past. We attribute this to the impact of competition, a larger revenue base and the longer time needed for rural users to increase usage. Bharti guided that ARPUs would have been Rs 12 higher or Rs 290 (- 5% qoq drop) in 1QFY10 without the effects of MTC while average revenue per minute (ARPM) would have trended up to ~Rs0.61/min from the reported Rs0.58/min.
ARPM has also been lower due to the effect of the rural drive, the free minutes arbitrage from the more rent-seeking element of its customer base and the strategic balance between usage and rates that Bharti is trying to maintain. EBITDA margins were resilient. The MTC flattered EBITDA margins which improved 1.1% pts qoq and 0.3% pts yoy as it lowered access charges by 20% on a qoq basis. Excluding MTC, mobile margins would have risen by 0.5% pts on a qoq basis from 31.5% to 32% from the reported 33% while enterprise margins would have trended up by only 0.7% pts to 46.6% in 1Q on a qoq basis from the reported 49.1%. Bharti is also concentrated on cost efficiencies particularly in network cost and is also looking to optimise its sales and distribution cost.
Downgrade to UNDERPERFORM. Following SingTel’s stellar share price performance which has shot past our SOP-based target price of S$3.20, we are downgrading our recommendation to UNDERPERFORM.
Newsflow turning negative. In addition to the disappointing results by Bharti, we believe newsflow from India could be increasingly negative where the cost of 3G spectrum could be surprise on the upside given its scarcity. While we are mildly positive on Bharti’s proposed merger with MTN, the market appears to be more cautious. We expect more newflow on this in the coming weeks, which could be negative on SingTel’s share price.
Rich valuations. Lastly, the implied 12-month forward rolling P/E of SingTel Singapore and Optus have surged to 17x, as illustrated in Figure 2 below. This is derived from subtracting SingTel’s market capitalisation from the sum of all its listed associates, and dividing the residual value with SingTel Singapore and Optus’s projected earnings. Except for Telkomsel (though Telkom Indonesia), SingTel’s associates have not re-rated significantly in the last few months, despite the strength in SingTel’s share price.
Sponsored Links
No comments:
Post a Comment