Good showing but telcos come under pressure <edge>
Good showing but telcos come under pressure

Southeast Asia’s top telco and Singapore’s second-biggest telco both announced their quarterly results this week.

Singapore Telecom announced its 2Q10 results while StarHub released its 3Q09 results and both companies are under some pressure — SingTel from abroad and StarHub from its only market at home.

Still, the big positive surprise came from StarHub, whose share price has been under pressure since end-Sept. DBS Research in a note earlier this week says StarHub could rebound as it has raised its dividend guidance.

The company plans to hike dividend to five cents per quarter, up from 4.5 cents. Hence, StarHub’s dividend of 19 cents this year, and 20 cents in 2010 would indicate a yield of 9.8% this year and 10.4% for the next.

In line with its profit growth, SingTel also raised its dividend by 10.7% to 6.2 cents from 5.6 cents a year ago. Assuming a similar 10% increase in the final dividend from last year’s 6.9 cents, total dividends for the fiscal year will likely come to 13.8 cents, which translates to a yield of just 4.7% with the stock at $2.94.

Lim & Tan Research says SingTel’s dividend is the main reason why it has a “buy” on the stock. But over at StarHub, not even a yield of 10% was enough to elicit a “buy” from some analysts. “Maintain fully valued, target price $1.90 in view of regulatory changes due to National Broadband Network and rising competition in the pay TV business, potentially spilling over to mobile business,” DBS Research states.

Citigroup Research has a “sell” call on StarHub, blaming the company’s hubbing strategy. Under this model, the company bundles its other services such as broadband, mobile and fixed lines around its cable TV product. “Exclusivity in sports content (in particular English Premier League) generated strong viewer interest and contributed a lot to the success of its strategy,” notes the Citigroup report.

However, SingTel’s win of the exclusive broadcasting rights of ESPN Star Sports and Barclays Premier League from 2010 will take away most, if not all, of the content on StarHub’s sports pack, Citigroup adds. “We estimate 250,000 (45% of StarHub’s total subscriber base) are subscribing to the data pack currently — the majority of whom we believe are likely to switch allegiance come June 2010,” it says.

Morgan Stanley says that StarHub’s EBITDA of $172 million (+4.5% y-o-y, +6.7% q-o-q) beat its estimate by 5.2%. Revenue improved and the company was able to save on costs, it points out. “Management kept its EBITDA margin guidance unchanged at 32% despite YTD margin running ahead at 32.6%,” Morgan Stanley notes. Net profit rose 7.3% y-o-y and 9.2% q-o-q to $85 million in 3Q09. Morgan Stanley has an “overweight” rating on StarHub.

Overseas units under pressure
SingTel announced that its underlying net profit rose 18.8% y-o-y to $952 million in 2Q 2010, in line with expectations. The growth was led by its Singapore and Australian businesses and an earnings recovery by Indonesian associate Telkomsel. Revenue expanded 5.4% to $4.10 billion.

There are headwinds though. In terms of mobile subscription, only Telkomsel and India’s Bharti Airtel registered strong growth. Globe Telecom of the Philippines experienced a 3% decline while AIS of Thailand, PBTL of Bangladesh and Warid of Pakistan posted moderate growth. Moreover, cash dividends from these units fell 15.4% from a year ago to $549 million, Lim & Tan points out.

According to Credit Suisse research, the guidance of low single-digit growth for Singapore EBITDA from SingTel management suggests that 2HFY10 Singapore EBITDA growth would be negative to flat. SingTel’s management attributes this to higher content cost and potentially weaker corporate demand in its second half. Credit Suisse values SingTel at $3.40 (down a cent from previous valuation). Some of the negatives of its associates may have been discounted, but owing to uncertainties relating to the launch of Singapore’s Next Generation National Broadband Network, Credit Suisse is maintaining a neutral rating.

Thank you Smily face, I have readed some report , but don't understand why ?
I have readed some report about this counter, but don't understand why the sellig pressure is so havy of it. anyway thanks for your friendly support!

因为bharti阿
看看bharti跌成什么样子就知道了