Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Singapore telecoms sector
Data fuelled, cashflow focussed
SingTel for growth, M1 for domestic exposure
We refresh our view on the Singapore telecoms sector and transfer coverage to
Prem Jearajasingam. We have a positive view on the sector—SingTel is our top
pick with a S$3.55 price target, providing for a 16% TSR.
SingTel’s sustainable 5% net dividend yield provides good support in tumultuous
markets, while the improving earnings trajectory out of Bharti will (by our
estimates) support an FY11-14 EPS CAGR of 8%. In addition to improving
earnings out of India, we see SingTel as a play on African growth as market
sentiment improves. The risk-on trade would also bode well for the A$ and
SingTel due to its exposure to Australia’s No.2 telco - Optus.
For pure Singapore exposure, our pick is No.3 operator, M1, which we see as
benefiting the most from the introduction of the Next Generation National
Broadband Network (NG NBN) given its previous lack of exposure to the fixed
broadband market. At 7.5x EV/EBITDA, M1 trades at a discount to the No.2
operator, Neutral-rated StarHub (8.0x), but offers greater dividend upside, given
its expanding FCF and dividend yield gap (2.3ppt by end 2013).
Data driven – wireless and wireline
Singapore telco revenue and profit growth will be fuelled by increased data
usage. By our estimates, the sector’s 3% 2011-2014 revenue CAGR will be
driven mainly by a 7% revenue CAGR from wireline and wireless data. The NG
NBN fibre network will broaden the market and in our view spur data revenues in
the wireline segment. Meanwhile, growing demand for mobile data as new
devices enter the market, coupled with new pricing plans as LTE services are
launched, should provide the next leg up for wireless revenue growth.
Opex and capex discipline fuelling cashflows
Increased emphasis on opex and capex will in our view support a Singapore
telco OCF CAGR between 2011-2014 of 7%, even as (our forecast) revenues
grow at 3%pa during this same period. As investments for NG NBN and LTE
ease, increased capex efficiency will by our estimates support a 3.1ppt increase
in OCF margins for the Singapore telcos between 2011-2014 even if EBITDA
margins during this period stay flat.
NG NBN and LTE - new opportunities
We see the ongoing NG NBN rollout as setting the stage for more exciting times
within the Singapore telecoms market. The NG NBN not only provides for new
revenue growth opportunities from new products and services, but also saves
operators significant capex in the long term. For incumbent SingTel, the NG NBN
provides long-term cashflows for its fixed line assets, ie ducts and manholes,
which will in our view mitigate the impact of increased competition in the
corporate market. For StarHub, the NG NBN opens up the S$800m pa corporate
and SME market while adding competition to its pay TV operations from the likes
of the proposed project NIMS. M1, meanwhile, gains the most from NG NBN, as
it finally has access to the fixed line market without the huge capital outlay. LTE,
meanwhile, paves the way for saner mobile data pricing in Singapore.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Singapore telecoms sector
Data fuelled, cashflow focussed
SingTel for growth, M1 for domestic exposure
We refresh our view on the Singapore telecoms sector and transfer coverage to
Prem Jearajasingam. We have a positive view on the sector—SingTel is our top
pick with a S$3.55 price target, providing for a 16% TSR.
SingTel’s sustainable 5% net dividend yield provides good support in tumultuous
markets, while the improving earnings trajectory out of Bharti will (by our
estimates) support an FY11-14 EPS CAGR of 8%. In addition to improving
earnings out of India, we see SingTel as a play on African growth as market
sentiment improves. The risk-on trade would also bode well for the A$ and
SingTel due to its exposure to Australia’s No.2 telco - Optus.
For pure Singapore exposure, our pick is No.3 operator, M1, which we see as
benefiting the most from the introduction of the Next Generation National
Broadband Network (NG NBN) given its previous lack of exposure to the fixed
broadband market. At 7.5x EV/EBITDA, M1 trades at a discount to the No.2
operator, Neutral-rated StarHub (8.0x), but offers greater dividend upside, given
its expanding FCF and dividend yield gap (2.3ppt by end 2013).
Data driven – wireless and wireline
Singapore telco revenue and profit growth will be fuelled by increased data
usage. By our estimates, the sector’s 3% 2011-2014 revenue CAGR will be
driven mainly by a 7% revenue CAGR from wireline and wireless data. The NG
NBN fibre network will broaden the market and in our view spur data revenues in
the wireline segment. Meanwhile, growing demand for mobile data as new
devices enter the market, coupled with new pricing plans as LTE services are
launched, should provide the next leg up for wireless revenue growth.
Opex and capex discipline fuelling cashflows
Increased emphasis on opex and capex will in our view support a Singapore
telco OCF CAGR between 2011-2014 of 7%, even as (our forecast) revenues
grow at 3%pa during this same period. As investments for NG NBN and LTE
ease, increased capex efficiency will by our estimates support a 3.1ppt increase
in OCF margins for the Singapore telcos between 2011-2014 even if EBITDA
margins during this period stay flat.
NG NBN and LTE - new opportunities
We see the ongoing NG NBN rollout as setting the stage for more exciting times
within the Singapore telecoms market. The NG NBN not only provides for new
revenue growth opportunities from new products and services, but also saves
operators significant capex in the long term. For incumbent SingTel, the NG NBN
provides long-term cashflows for its fixed line assets, ie ducts and manholes,
which will in our view mitigate the impact of increased competition in the
corporate market. For StarHub, the NG NBN opens up the S$800m pa corporate
and SME market while adding competition to its pay TV operations from the likes
of the proposed project NIMS. M1, meanwhile, gains the most from NG NBN, as
it finally has access to the fixed line market without the huge capital outlay. LTE,
meanwhile, paves the way for saner mobile data pricing in Singapore.
No comments:
Post a Comment