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,

 

Revenue

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

 

EBITDA

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?

 

FCF

 

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.

ICR

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

CAPEX

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.)

 

Dividend

 

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.

Challenges

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.

2020: A Year in Review

Time really flew past in 2020 and it's time for a review of the year again.

 

Here is goes. 

Family

We have a new addition to our family in 2020. Our son arrived safe and sound in August to meet his parents and sister.

This means less personal time for myself but more bonding time with kids on the other hand.

It's a hard juggle some times though.

Our hope is for our kids to grow up healthy, happily and with the right values in life.

Healthy Lifestyle

My health in the past year is generally good except for the last week of the year where I came down with a sore throat. 

 

I think that was the first time I visited a doctor in 2 ~ 3 years.

 

Other than that I am pleased and thankful for the healthy body in an otherwise unhealthy year for the world.

 

Earlier this year I came up with an exercise regime that can be done at home. It trains most of the major muscle groups of the body and combine resistance training with cardio respiratory training.

I've blogged about it here previously.

 

I did the training almost daily till July / August where I stopped and the effect on the body is pretty visible. Both internally and externally.

 

I have restarted the training this week and hope to do it as often as my time allows.

 

Guess this, together with the cold showers that I've taken since years ago, really helps to keep one healthy. 

Oh the cold weather these few days makes the showers even shioker!

 

Recently I have also attended a certified personal trainer course to learn how to train more effectively. Hopefully I can pass with flying colours.

Work

With my financial year ending in February 2021, I still have two months to charge ahead.

 

Results so far for this FY are terrible. Business secured and project value both dropped tremendously.

This FY is expected to be a loss-making year.

 

The circuit breaker earlier this year means no new business coming in for most part of the year. Projects that were in discussion were put on hold. And I couldn't go out for sales talk due to the travel and social distancing restrictions.

 

But no excuses here. I should have work harder.

 

On the bright side, I made use of the time to get some certifications for the company which will come in useful especially when bidding for public projects.

 

Good thing is that the company is still surviving due to the good performance of the past two years.

Hopefully this year onwards we can more than cover the shortfall of the precedent year.

Moving forward, my focus is to grow the business and start hiring if company performance improves.

Financials and Other Incomes

Previously I have set these targets for 2020.

Targeted Passive Income	Actual Passive Income Achieved
$7,200.00	$6,687.14	vs $4,471.25 in 20199
Targeted Side Income	Actual Side Income Achieved
$6,000.00	$2,563.49	vs $5,314.78 in 20199

Results: Both targets not achieved.

For 2021,

Targeted passive income: S$8,900
Targeted side income: S$11,500

Investments

Received my last round of dividends for the year in December consisting of:

 

1) ESR REIT @ $79.80

2) MNACT @ $115.04

3) Netlink Trust @ $202.40

4) DBS @ $108

5) MLT @ $201.30

6) CRCT @ $220

7) Ascendas REIT @ $287

 

Total: $1,213.54

 

Moving forward investment-wise, my plan for this year is to:

 

1. Get rid of the dead wood in my portfolio (was planning to do it last month but the price had a drastic fall on the day I wanted to sell)

 

2. Allocate a portion of my investments into crypto currencies (probably 1% of my portfolio for a start)

3. Invest into the US market

My investment style remains the same: Income investing.

 

Hence main focus will still be concentrated in the local companies where the yield is still attractive.

 

My holdings as of 31/12/2020:

S/N	Counter	No. of Shares	Cost incl. Fees	Price at 31/12/2020	Value at 31/12/2020
1	OCBC	1,055	$9,310.49	$10.060	$10,613.30
2	SingTel	8,000	$25,820.21	$2.310	$18,480.00
3	CICT	5,400	$9,307.87	$2.160	$11,664.00
4	Suntec REIT	4,000	$6,629.59	$1.490	$5,960.00
5	CapitaLand	4,000	$11,969.70	$3.280	$13,120.00
6	ISOTeam	50,000	$21,070.79	$0.130	$6,500.00
7	Netlink Trust	8,000	$6,337.19	$0.965	$7,720.00
8	Mapletree Logistic Trust	10,000	$13,820.80	$2.010	$20,100.00
9	RHT Health Trust	10,000	$1,460.58	$0.019	$190.00
10	ESR REIT	10,000	$5,334.46	$0.395	$3,950.00
11	Mapletree NAC Trust	4,000	$4,455.20	$0.970	$3,880.00
12	Ascendas REIT	7,000	$20,419.89	$2.980	$20,860.00
13	CRCT	9,100	$12,973.67	$1.390	$12,649.00
14	DBS	600	$13,148.49	$25.040	$15,024.00
				Total Value:	$150,710.30

 

Took part in several preferential offers in 2020 including Mapletree Logistic Trust, Ascendas REIT and CapitaLand Retail China Trust with the latter two happening in the last month of the year.

 

Also applied for excess for all three POs and received it for both MLT and Ascendas.

For CRCT, I had applied for a total of 13,000 units (allocation + excess) but ended up only getting 4,000 units.

 

All the above are quality businesses which I have no qualms in taking the opportunities presented to add to my investments.

Back in March 2020, I have identified CRCT, DBS and OCBC among the counters in my watch list to focus my funds on.

So far I have added 3 batches of CRCT and 2 batches of DBS and OCBC each.

 

As of year end 2020, number of holdings in my portfolio increased to 14 counters compared to 13 in 2019.

 

Portfolio value at end of the year increased to S$150,710 (vs S$122,453 in 2019).

 

Tabulated summary:

Year end portfolio cost incl. fees		$162,059
Year end portfolio value		$150,710
2020 dividend collected		$6,094
2020 net realised P/L		$3,516
Total accumulative dividend collected		$22,029
Total invested to long term portfolio in 2020		$59,269

 

Again, the overall portfolio was dragged down by ISOTeam which I have the intention to realise the loss and place the remaining fund elsewhere.

Other than that, the realised P&L is a positive.

My transactions for 2020:

S/N	Counter	No. of Shares	Cost incl. Fees	Type
1	OCBC	500	$4,615.63	Bought
2	OCBC	500	$4,257.27	Bought
3	OCBC	31	$241.49	Bought
4	SingTel	3,000	$7,452.73	Bought
5	CCT	3,500	$5,716.86	Bought
6	Mapletree Logistic Trust	2,483	$4,942.17	Bought
7	Japfa	10,000	$5,002.00	Bought
8	Japfa	40,000	$24,716.05	Sold
9	Ascendas REIT	2,000	$5,921.00	Bought
10	Ascendas REIT	5,000	$13,596.40	Bought
11	Ascendas REIT	5,000	$13,902.24	Sold
12	CRCT	5,000	$7,680.40	Bought
13	CRCT	3,000	$4,005.27	Bought
14	CRCT	1,100	$1,288.00	Bought
15	DBS	300	$7,194.36	Bought
16	DBS	300	$5,954.13	Bought
17	DLC SG5xShort DBS	5,000	$6,275.00	Bought
18	DLC SG5xShort DBS	5,000	$5,075.00	Sold
19	DLC SG5xShort DBS	10,000	$17,800.00	Bought
20	DLC SG5xShort DBS	10,000	$15,300.00	Sold
21	DLC SG5xShort SIA	10,000	$8,027.55	Bought
22	DLC SG5xShort SIA	10,000	$7,794.96	Sold
23	Keppel DC REIT	5,000	$11,519.69	Bought
24	Keppel DC REIT	5,000	$11,709.77	Sold
		Total Bought:	$121,489.95
		Total Sold:	$78,498.02

 

Quite a number of transactions done for my standard. Unfortunately not all turned out to be good trades.

 

Highlights include averaged down on Japfa in batches which turned in a profit and some bad trades on DLCs.

 

Hopefully I will improve on my trading skills in the year ahead.

 

Lastly, here's wishing everyone a blessed and healthy 2021.