Singtel’s Financial Performance: 42% Net Profit Decline for H1 FY2024

Company Overview

Singapore Telecommunications Limited (Singtel) is a major telecommunications company with core business operations spanning mobile, fixed voice and data, pay television, content and digital services, ICT, and equipment sales. The company operates through several business segments, including Optus in Australia, Singtel Singapore, NCS, and Digital InfraCo, with a significant presence in the Asia Pacific region.

Industry Position and Market Share

Singtel is a leading player in the telecommunications industry, with significant market share in Singapore (45.5%) and Australia (30.7%). The company also has substantial stakes in major regional associates like Bharti Airtel, Telkomsel, AIS, and Globe, providing it with a broad customer base and extensive geographic footprint.

Revenue Streams and Customer Base

Singtel’s revenue streams are diversified across various segments:

• Mobile Services and Equipment Sales
• Infocomm Technology (ICT)
• Data and Internet
• Fixed Voice and Pay Television

The company’s customer base includes 788 million mobile customers, with significant contributions from its regional associates.

Income Statement Analysis

For the half-year ended 30 September 2024, Singtel reported an operating revenue of S\$6.99 billion, a slight decline of 0.5% year-on-year. EBITDA and EBIT grew by 9.0% and 27% respectively, primarily driven by Optus and NCS. However, due to an exceptional gain in the previous period, net profit declined by 42% to S\$1.23 billion.

Balance Sheet Analysis

As of 30 September 2024, Singtel’s total assets amounted to S\$45.16 billion, with net assets of S\$24.59 billion. The company maintained a strong financial position with a net debt of S\$9.73 billion and a gearing ratio of 28.3%. Cash and cash equivalents stood at S\$2.60 billion.

Cash Flow Statement Analysis

Net cash inflow from operating activities was S\$2.14 billion. However, the net cash outflow for investing activities was S\$2.20 billion, primarily due to spectrum payments. The free cash flow increased by 9.3% to S\$1.30 billion.

Dividend and Special Activities

Singtel declared an interim ordinary dividend of 7.0 cents per share for H1 FY2024, an increase of 35% from the previous period. This includes a core dividend of 5.6 cents and a value realization dividend of 1.4 cents per share. Additionally, the company is undertaking strategic initiatives like the sale of its digital wallet platform, Dash, and investments in advanced network capabilities.

Key Findings and Recommendations

Strengths

• Stable operating revenue with growth in key segments like Optus and NCS
• Strong financial position with a significant global footprint
• Strategic initiatives to enhance profitability and market positioning

Risks

• Decline in net profit due to exceptional gains in the previous period
• High capital expenditure impacting cash flows
• Currency translation risks affecting contributions from regional associates

Recommendations

If you currently hold Singtel stock, it is recommended to hold your position due to the company’s stable revenue streams, growth in key segments, and strategic initiatives. If you do not hold Singtel stock, it is advised to consider investing, given the company’s market leadership, dividend yield, and long-term growth prospects in the telecommunications sector.

Disclaimer

This recommendation is based on the provided financial report and is intended for informational purposes only. It is important to conduct your own research or consult with a financial advisor before making any investment decisions.

Report Date

The financial report is for the half-year ended 30 September 2024.