To The Moon

With a slew of blue-chip companies releasing results these few weeks, we shine the spotlight on Singtel’s(SGX: Z74) latest fiscal 2023 third quarter (3Q FY2023) business update.

Previously, we highlighted the telco’s declaration of a special dividendas it posted a respectable set of earnings for its fiscal 2023’s first half.

However, the latest business update from Singtel came in mixed.

Operating profit declined year on year but a higher share of regional associates’ net profit helped to boost Singtel’s bottom line.

These financial numbers came in better than its peer StarHub Limited (SGX: CC3), whichreporteda lower net profit along with reduced dividends.

We dug deeper into Singtel’s numbers and plans to determine what’s to come for the telco.

Here are five highlights that investors should note.

1. A mixed bag of numbers

Operating revenue dipped by 0.9% year on year to S$3.7 billion for 3Q FY2023 mainly due to the absence of contributions from Amobee for this quarter.

Excluding Optus’ one-off NBN migration revenue along with Amobee, Singtel’s underlying operating revenue would have increased by 6% year on year from last year’s S$3.66 billion.

CEO Yuen Kuan Moon saw strong roaming recovery across the telco’s consumer and enterprise businesses even as Optus began to regain customers’ trust after a devastating cyberattack.

Underlying operating profit, however, slipped by 9.2% year on year to S$288 million.

Fortunately, Singtel’s regional associates posted a 31.2% year on year jump in post-tax profits, helping to lift the telco’s underlying net profit by 24.5% year on year to S$559 million.

2. Firing on (almost) all cylinders

Digging deeper into Singtel’s various divisions, we can conclude that the group is firing on almost all of its cylinders for the quarter.

Its Singapore Consumer division enjoyed a 3% year on year increase in revenue to S$497 million while NCS’ revenue climbed 21% year on year to S$676 million.

Optus’ revenue slipped by 3.8% year on year to S$1.9 billion but this was because of an 8% depreciation in the Australian dollar against the Singapore dollar (SGD).

If currency effects are excluded, Optus would have reported a 4.4% year on year revenue increase.

Elsewhere, group enterprise revenue edged down slightly by 0.8% year on year from S$650 million in 2021 to S$645 million in 2022.

3. Pay TV continues to weaken

Singapore’s Mobile and Fixed Broadband divisions performed well for the quarter but Pay TV continues to weaken.

Mobile service revenue jumped 14.3% year on year to S$327 million for 3Q FY2023 as the number of mobile customers rose 3.1% year on year to 4.3 million.

The average revenue per customer (ARPU) also improved by 12.5% year on year to S$27 per month with data usage jumping 25% year on year from eight gigabytes (GB) to 10 GB.

Fixed Broadband revenue inched up 1.6% year on year to S$124 million with a slight 1.1% year on year rise in the number of lines to 666,000.

Pay TV’s performance was disappointing as the division continued to witness customer attrition.

Residential TV customers fell by 9.4% year on year to 328,000 with revenue falling by 18.4% year on year to S$40 million.

4. A breath of fresh air from regional associates

Singtel’s regional associates pulled their weight this quarter with a stronger performance.

Thai associates AIS and InTouch both posted higher year on year post-tax contributions while the Philippines’ Globe also saw post-tax profit rise 10.6% year on year to S$41 million.

The standout performer was Airtel, which saw a 153.4% year on year surge in post-tax profit to S$113 million.

Only Indonesia’s Telkomsel saw its net profit slip slightly by 2.8% year on year to S$162 million.

All the associates were also hit by currency depreciation against the SGD; excluding currency effects, the associates would all have reported higher year on year net profit.

5. A brighter outlook for 2023

Singtel expects its business to continue recovering as China reopens its borders.

The increased tourism flow should result in higher data usage and roaming, thereby benefitting its mobile service revenue.

Students have also been streaming back to campus in Australia, a further sign that roaming revenue can continue to improve.

For NCS, the group anticipates that margins will improve as fewer expenses will be incurred in the coming quarters to scale up the division.

$SINGTEL(Z74.SI)$

Source: The Smart Investor