Singtel Financial Report Analysis: Net Profit Declined by 42%

Business Description

Singapore Telecommunications Limited (Singtel) is a leading communications technology group in Asia, offering an extensive suite of services including mobile, fixed voice and data, pay television, content, digital services, ICT, and equipment sales. The company operates through several business segments: Optus in Australia, Singtel Singapore, NCS, and Digital InfraCo. Singtel also has significant investments in associates and joint ventures in the region, including Airtel, AIS, Telkomsel, Globe, and Intouch.

Industry Position and Competitors

Singtel holds a strong position within the telecommunications industry, with leading market shares in Singapore and Australia. Its main competitors include other major telcos such as StarHub and M1 in Singapore, and Telstra and Vodafone in Australia. Singtel’s extensive network and strategic investments in regional associates give it a competitive edge.

Revenue Streams and Customer Base

Singtel’s revenue streams are diversified across mobile services, equipment sales, ICT, data and internet services, fixed voice, pay television, and others. The Group’s customer base is substantial, with a combined mobile customer base of 788 million as of 30 September 2024, including customers from its regional associates.

Financial Statements Analysis

Income Statement

For the half-year ended 30 September 2024, Singtel’s operating revenue remained stable at S\$6.99 billion. However, net profit fell significantly by 42% to S\$1.23 billion, primarily due to an exceptional S\$1.2 billion gain from Telkomsel’s equity dilution in the previous period [[5]]. EBITDA increased by 9.0% to S\$1.95 billion, driven by Optus and NCS [[5]].

Balance Sheet

As of 30 September 2024, Singtel’s total assets stood at S\$45.16 billion, with net assets of S\$24.59 billion. The Group’s financial position remains strong with ratings of A1 by Moody’s and A by S&P Global Ratings [[9]].

Cash Flow Statement

Net cash inflow from operating activities was down by 5.6% to S\$2.14 billion. Free cash flow increased by 9.3% to S\$1.30 billion due to improved operational performance and lower capital expenditure despite the absence of a special dividend from Telkomsel [[14]].

Key Findings

Strengths

• Stable operating revenue despite market challenges.
• Strong EBITDA growth driven by Optus and NCS.
• Significant market share in key regions.
• Strong financial position with good credit ratings.

Risks

• Significant decline in net profit due to exceptional gains in the previous period.
• Exposure to currency fluctuations impacting associate contributions.
• Ongoing competition in core markets.

Dividends

The Board approved an interim ordinary dividend of 7.0 cents per share for the half year ended 30 September 2024, up 35% 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 [[16]].

Special Activities

Singtel is focusing on enhancing its network capabilities and expanding its data center business. The company also plans to invest in new technologies such as AI and cloud services to drive future growth [[22]].

Investment Recommendations

For Current Investors

Hold: Considering the stable revenue, strong market position, and the strategic focus on new technologies, holding the stock may be beneficial for long-term gains.

For Potential Investors

Buy: The decline in net profit is primarily due to exceptional gains in the previous period, and the company’s core operations remain strong. Investing now could be advantageous given the attractive dividend yield and future growth potential.

Disclaimer

The recommendations provided are based on the analysis of the financial report for the half year ended 30 September 2024. Investors should consider their own financial situation and investment goals before making any investment decisions.