Singtel H1 FY25 Financial Analysis: Net Profit Decline of 42%

Business Description

Singtel is Asia’s leading communications technology group, providing a range of services from next-generation communication, 5G, and technology services to infotainment for both consumers and businesses. The company operates across Asia, Australia, and Africa, reaching over 780 million mobile customers in 21 countries. Singtel offers integrated services including mobile, broadband, and TV for consumers, and workforce mobility solutions, data hosting, cloud, network infrastructure, analytics, and cyber security for businesses.

Industry Position and Market Share

Singtel holds a strong position within the telecommunications industry with a significant presence in Asia, Australia, and Africa. The company faces competition from regional and international telecom giants but has maintained a competitive edge through continuous innovation, infrastructure investment, and strategic partnerships.

Revenue Streams and Customer Base

Singtel’s revenue streams include mobile services, broadband, TV, data hosting, cloud services, network infrastructure, and cyber security capabilities. The customer base spans both consumers and enterprises, with a focus on delivering comprehensive communication and technology solutions.

Financial Statement Analysis

Income Statement

The group’s EBIT grew by 27% to S\$738 million, driven by improvements in Optus and NCS. However, the net profit decreased by 42% to S\$1.23 billion due to an exceptional gain in the previous year from the issuance of Telkomsel shares. Underlying net profit increased by 6% to S\$1.19 billion.

Balance Sheet

Singtel maintains a solid financial position with a cash balance of S\$2.68 billion. However, net debt increased to S\$9.73 billion primarily due to spectrum payments in Australia.

Cash Flow Statement

Free cash flow rose by 9% to S\$1.30 billion, driven by better operating performance and efficient capital expenditure management.

Dividends

An interim ordinary dividend of 7.0 cents per share has been approved, reflecting a 35% increase from the previous period. This comprises a core dividend of 5.6 cents per share and a value realisation dividend of 1.4 cents per share, totaling S\$1.16 billion. A total dividend of 8.9 cents per share will be distributed on 9 December 2024.

Key Findings

• Strengths: EBIT growth of 27%, stable operating revenue, significant dividend increase, solid financial cash flow.
• Risks: Net profit decrease by 42% due to exceptional gain in the previous year, increased net debt.

Special Activities

Singtel is implementing its Singtel28 growth plan, focusing on simplifying product offerings, innovating with new technologies like AI and data centres, and active capital management initiatives. This includes backing the amalgamation of Intouch and GULF to simplify shareholding in AIS, which increased the value of Singtel’s stakes by S\$2.5 billion.

Recommendations

If Currently Holding the Stock

Investors should consider holding their positions due to the strong underlying EBIT growth, increased dividends, and strategic initiatives to drive future profitability.

If Currently Not Holding the Stock

Potential investors may consider taking a position in Singtel, leveraging the company’s solid financial performance, strategic growth plans, and dividend yield.

Disclaimer: This recommendation is based on the financial report provided and should be considered in the context of individual financial goals and risk tolerance.

Report Date

The report is dated 13 November 2024, covering the financial results for the half-year ended 30 September 2024.