With reference to 12th Aug 08 announcement of SingTel 1Q FY09 earning, following is a brief summary of it.
1. Operating Revenue for 1Q FY09 up 5.9% to S$3.77b as compared with 1Q FY08 of S$3.56b.
2. Operating EBITDA for 1Q FY09 up 2.6% to S$1.146b as compared with 1Q FY08 of S$1.117b.
3. Operating EBITDA margin dropped to 30.3% for 1Q FY09 from 31.3% for 1Q FY08.
4. EBITDA for 1Q FY09 down 2.3% to S$1.728b as compared with 1Q FY08 of S$1.769b.
5. Net Profit for 1Q FY09 down 5.3% to S$878m as compared with 1Q FY08 of S$927m.
6. EPS for 1Q FY09 down 5.3% to 5.52 S cents as compared with 1Q FY08 of 5.83 S cents.
SingTel 1Q FY09 net profit dropped 5.3% due to lower contributions from its regional associates despite a 5.9% increase in operating revenue. It also warned earnings could be further impacted by currency fluctuations. Based on the result, the followings are responses from analysts.
1. Credit Suisse maintains outperform rating with unchanged target price of $4.15
2. Morgan Stanley maintains equal-weight rating, cut target price from $3.60 to $3.55
3. UBS maintains buy rating, cut target price from $4.65 to $4.60
4. OCBC maintains buy rating, cut target price from $4.29 to $3.85
5. KimEng maintains hold rating, cut target price from $4.00 to $3.58
6. CIMB-GK maintains neutral rating, cut target price from $4.05 to $3.80
7. Daiwa downgrades to hold from outperform, cut target price from $4.43 to $3.84
Assuming SingTel is able to maintain the same EPS for rest of FY09, this would give a FY09 EPS of 22.08 S cents. At 15th Aug 08 price of $3.49, this will translate to 15.8x FY09 PE. Average fair value by most analysts is about $3.90, which translates into 17.6x FY09 PE. Below is a list of valuation base on estimation FY09 EPS of 22.08 S cents.
20x FY09 PE -- $4.42
19x FY09 PE -- $4.19
18x FY09 PE -- $3.97
17x FY09 PE -- $3.75
16x FY09 PE -- $3.53
15x FY09 PE -- $3.31
14x FY09 PE -- $3.09
13x FY09 PE -- $2.87
12x FY09 PE -- $2.65
11x FY09 PE -- $2.43
10x FY09 PE -- $2.21
Technically, SingTel's price is trading near the $3.40 support level presently. Despite the potential slow growth in its earning, SingTel is dedicated to reward shareholders with consistent dividend payout and with teleco business as a potential defensive play for current volatile market, the downside for the moment could be capped at $3.40 while the upside is capped at $3.70. For investors who want a greater margin of safety for long term investment, valuation at 10x FY09 PE of $2.21 would be an attractive entry price.
