Singtel H1 FY25 Financial Analysis: Net Profit Down by 42%

Business Description

Singtel is Asia’s leading communications technology group, offering services ranging from next-generation communication, 5G, technology services to infotainment for both consumers and businesses. The Group has a significant presence in Asia, Australia, and Africa, reaching over 780 million mobile customers in 21 countries. Singtel provides an integrated suite of services, including mobile, broadband, and TV for consumers, and a range of solutions such as data hosting, cloud, network infrastructure, analytics, and cybersecurity for businesses.

Industry Position

Singtel holds a leading position in the communications technology industry within the regions it operates. Key competitors include local and regional telecommunications companies. Despite intense competition, especially in markets like Indonesia and Africa, Singtel continues to maintain a strong market share through strategic investments and innovations.

Revenue Streams

The company’s revenue streams are diversified across mobile services, broadband, TV, digitalisation services, data centres, and cybersecurity capabilities. Singtel’s core revenue comes from its operations in Singapore and Australia, with significant contributions from its regional associates in countries like Thailand, the Philippines, India, and Indonesia.

Financial Statement Analysis

Income Statement

For the half year ended 30 September 2024, Singtel reported an operating revenue of S\$6.99 billion, a slight decrease of 0.5% compared to the previous year. The net profit decreased by 42% to S\$1.23 billion, mainly due to a significant exceptional gain in the corresponding period last year.

Balance Sheet

Singtel maintains a strong financial position with a cash balance of S\$2.68 billion. The net debt increased to S\$9.73 billion, attributed to spectrum payment in Australia. The company’s financial stability is supported by largely hedged debt with fixed interest rates.

Cash Flow Statement

Free cash flow rose 9% to S\$1.30 billion, driven by improved operating performance and efficient capital expenditure. Dividends from regional associates contributed significantly to the cash flow.

Dividend

The Board approved an interim ordinary dividend of 7.0 cents per share, up 35% from the previous corresponding period. This includes 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. The total dividend of 8.9 cents per share is set to be paid on 9 December 2024.

Key Findings

Singtel’s strength lies in its diversified revenue streams and strong market presence in Asia and Australia. The company’s strategic initiatives in areas like AI and data centres are expected to drive future growth. However, risks include intense competition in key markets and the impact of currency depreciation in regions like Africa.

Report Date and Financial Year

The report is dated 13 November 2024 and covers the half-year financial performance ending 30 September 2024.

Special Activities

Key initiatives include the Singtel28 growth plan to enhance business performance, investment in AI infrastructure, development of next-generation data centres, and active capital management to optimize the group’s shareholding in regional associates.

Recommendations

For Current Investors

Hold: Given the strong underlying earnings growth and consistent dividend payouts, current investors should consider holding onto their shares. The ongoing strategic initiatives and capital management efforts are likely to enhance long-term value.

For Prospective Investors

Buy: Prospective investors may find Singtel an attractive investment due to its solid financial position, diversified revenue streams, and strategic growth initiatives in high-potential areas like AI and data centres. The current dip in net profit presents a potential buying opportunity before the expected recovery and growth.

Disclaimer

This recommendation is based on the financial report provided and current market conditions. Investors should conduct their own research and consider their financial situation and investment goals before making any investment decisions.