February 8, 2018

Singtel’s 3QFY18 operating revenue grew 4.4% YoY to S$4.60b driven by growth across the Consumer segment (+3.1%) and Digital Life segment (+121.9%) but partly offset by a 3.9% decline in revenue from the Enterprise segment. This resulted in a 6.0% YoY growth in 3QFY18 EBITDA to S$1.29b. However, 3QFY18 share of associates’ pre-tax profits fell 20.4% YoY to S$553m, mainly impacted by: 1) associate in India (-73.4%) due to the disruptive competition as well as the steep cut in domestic IUC rate in India, and 2) associate in Indonesia (-8.6%) due to higher depreciation charges from network investments and a 6% depreciation of IDR against SGD. Consequently, 3QFY18 underlying NPAT fell 8.0% YoY to S$898m but excluding Airtel’s (associate in India) results, it would have fallen by 5.8% YoY to S$874m. For 9MFY18, operating revenue grew 6.5% YoY to S$13.2b while EBITDA rose 4.5% to S$3.85b, which is largely in-line with our expectations as it met 75% of our FY18 forecast. However, on similar reasons as 3QFY18, 9MFY18 underlying NPAT (excluding the exceptional gain of S$2.0b recorded in 2QFY18 from the divestment of NetLink Trust) decreased 5.2% YoY to S$2.74b, and met 71% of our FY18 forecast, but would have been only 0.3% lower if Airtel was excluded. Pending an analyst briefing, maintain BUY but put our FV of S$4.19 under review by OCBC Investment Research. Share price closed at S$3.400