Thursday 11 November 2021

Review of SingTel H1FY2022 Results

SingTel released their FY2022 1st half results today before market opens.
I have been looking forward to this due to the many positivities surrounding SingTel recently and indeed, the results are impressive though with certain weaknesses if we delve deeper.

Comparing to the corresponding period (H1FY21) last year,

Increased by 3% driven mainly by the Australian business, NCS and Amobee.

Largely stable. Contribution from Australia consumer is offset by the decrease in Singapore consumer and NCS.

Associates Contributions

Regional associates which have frequently been a cash cow for SingTel, deliver 21% increase in pre-tax profits due to a strong turnaround by Airtel which saw operation improvement in their India and Africa markets.
Underlying Net Profit
Increased by 17%. For dividend lovers myself included, this is the figure to pay attention to since SingTel will be paying dividends based on 60% - 80% of its underlying net profit.

Net Profit

More than double the net profit (105% increase). What more can I say?
Free cash flow which I've always pay close attention to, improved 4% to S$1.771 B driven by Australia and the associates. Contribution from Singapore market actually fell around 10%.

Debt and Gearing

Net debt decreased by S$1.4 B and consequently, gearing has been reduced to 29% (compared to 32.1% last September).

This is good considering the anticipated CAPEX for the digital bank and continual business restructuring.

Since SingTel has not announced any special dividend for the net proceeds from divestment of Optus (~A$1.9 B) and Telkomsel (S$200 M) towers, I think they will be conserving this cash for the said capital expenses.


Interest coverage also increased to 14.8 times as compared to 13.3 times in last Sept.


SingTel has guided that the capital expenses for FY2022 will be around S$2.4 B. This should be well covered by the capital recycling which they have undertaken as mentioned above as well as the debt facilities on which they should have sufficient headroom with their A1 rating from Moody's.

(S&P gave an 'A' rating as well but with negative outlook although I believe this is last year's figure. Fitch gave an 'A' with stable outlook.)
Interim dividend of 4.5 cents per share is a reduction of 11.8% from last year's 5.1 cents per share.
Looks like the new CEO, Mr Yeun Kuan Moon is a conservative man.
Assuming the full year dividend is reduced by the same margin, that will translate to 6.61 cents per share for total dividend. Is SingTel transiting from a dividend counter to a growth one?
Anyway this is only an assumption and the final dividend is very much dependent on the 2nd half results as well.
Personally I don't think it will go to that.
It has also been mentioned that barring any unforeseen circumstances, the Group expects to pay dividends at the upper half of its dividend policy range of between 60% - 80% of underlying net profit for FY22.

Let's see how it goes.
Since this round of dividend is a 76% payout, it translates into S$747.08 M which is about 42% of the free cash flow generated during this half.

This is well covered and sustainable.
Special Mention
Since I have always been an environmental person both professionally and personally (I run an environmental engineering company), I like to pay attention to companies' ESG efforts too.

I like that SingTel has pledged to cut their greenhouse gases emissions by 42% by 2030.


The Singapore consumer market remains a challenging one for SingTel with their revenue contribution falling slightly and EBITDA falling by 5% in this half.
NCS saw its revenue increased by 5% but their EBITDA actually fell 21% although this is partly due to lower JSS distribution from the government.
Free cash flow contribution from Singapore market fell around 10%.
Possibility of deterioration of Covid-19 situation across the various markets.
Future Catalysts
Moving forward there are several catalysts that we can look forward to (pun intended : ))
Contributions from data centres. SingTel is projecting a ~170 MW data centre capacity in 3 to 5 years time, up from the current ~70 MW.

Earnings boost from Singapore digital banking operations from 2022 onwards.
Possible digital banking license win in Malaysia.
Continued rejuvenation of their business especially their pivoting into ICT and digital services.
Capital recycling (hopefully with special dividend) by offloading non-core assets. SingTel has guided a figure of S$2 B excluding the Optus divestment. So it is almost certain that we will see more divestments coming.
Continued improved performance from associates especially Airtel.

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