Underlying earnings below expectations; surprise largely stemmed from a weak Singapore.
Guidance for stable FY19F EBITDA from core business despite 1% y-o-y drop in 1H19, implies pick up in 2H19F.
- The guidance assumes AUD/SGD of S$1.05 versus S$1.00 now and excludes National Broadband Network (NBN) migration fee in Australia.
- Two key drivers in 2H19F would be
- rebound in Infocomm Technology (ICT) revenue with ~S$300m of additional ICT revenue versus 1H19 from Smart Nation contracts;
- S$300m of cost savings in 2H19F versus S$193m cost savings in 1H19.
- However, we have trimmed FY19F/20F EBITDA from the core markets by 2% each to factor weaker Singapore contribution, leading to 3% cut in FY19F/20F EPS.
Singapore disappointed due to three key reasons.
- S$13m sequential drop in Singapore consumer EBITDA due to drop in mobile service revenue
- Amobee recording negative EBITDA of S$10m (vs. breakeven in 1Q19) with the consolidation of losses of the Videology
- ~S$5m sequential drop in Singapore enteprise EBITDA due to weak ICT revenue and rise in costs.
BUY with revised Target Price of S$3.59.
- We lowered our sum-of-the-parts (SOTP) valuation to S$3.59 as we cut FY19F/20F EBITDA in Singapore by 4% each. See the breakdown on SOTP in the PDF report attached.
- Reiterate our BUY call on the back of a rebound in associate contributions in FY20F led by Telkomsel, AIS and Globe. attractive valuations, and ~5.6% dividend yield.
More Info: research.sginvestors.io