January 2010

Results Announcement

• 13 Jan 10 : SPH
  
• 19 Jan 10 : M1
  
• 4 Feb 10 : StarHub
  

 

STI = 2913.25 (-17.24)

Stock	Period	DPS ct	Price	Yield	PE	Div Breakdown
SPH	FY09 : Aug	25.0	S$3.60	6.944%	13.85	Interim 7ct ; Final 9ct + 9ct (Special)
SingPost	FY09 : Mar	6.25	S$1.00	6.250%	12.94	Q1 1.25ct ; Q2 1.25ct ; Q3 1.25ct ; Q4 2.5ct
STI ETF	Jun-09	4.0	S$2.98	2.685%	--	Jun09 4ct ; Dec08 5ct ; Jun08 6ct
STEng	FY08 : Dec	15.8	S$3.31	4.745%	20.92	Final 4ct + 8.8ct (Special) ; Interim 3ct

Transport

Stock	Period	DPS ct	Price	Yield	PE	Div Breakdown
SBSTransit	FY08 : Dec	6.6	S$1.74	3.793%	13.19	Interim 3ct ; Final 3.6ct
ComfortDelgro	FY08 : Dec	5.0	S$1.62	3.086%	16.89	Interim 2.6ct ; Final 2.4ct
SMRT	FY09 : Mar	7.75	S$1.91	4.058%	17.85	Interim 1.75ct ; Final 6.0ct

TELCO

Stock	Period	DPS ct	Price	Yield	PE	Div Breakdown
SingTel	FY09 : Mar	12.5	S$3.03	4.125%	13.98	Interim 5.6ct ; Final 6.9ct
M1	FY08 : Dec	13.4	S$1.96	6.837%	11.67	Interim 6.2ct ; Final 7.2ct
StarHub	FY08 : Dec	18.0	S$2.14	8.411%	11.71	Q1 4.5ct ; Q2 4.5ct ; Q3 4.5ct ; Q4 4.5ct

Funds / Infrastructure

Stock	Period	DPS ct	Price	Yield	NAV	Div Breakdown
SPAus	1H10 : Sep09	A4.0 (Gross)	S$1.15	8.926%	A$0.91 (NTA)	2H09 A5.6578ct ; 1H09 A5.7431ct
MIIF	1H : Jun-09	1.5	S$0.46	6.522%	$0.81	2H08 3.0ct ; 1H08 4.25ct

* SPAus DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.2831) fm Yahoo

NOTES :

• Mkt Price is as on 7-Jan-10
  
• SPAus : 1H09 (Sep08) – A4ct (before tax) / Est. A3.8113ct (after tax)
  
• SingTel : 1H10 (Sep09) - Interim 6.2ct
  
• StarHub : FY09 Div Policy 19ct ie. Q1/Q2 : 4.5ct ; Q3/Q4 : 5ct
  
• StarHub : Q309 (Sep) - 5ct ; Q209 (Jun) - 4.5ct ; Q109 (Mar) - 4.5ct
  
• SMRT : Q210 (Sep09) - Interim 1.75ct
  
• SingPost : Q210 (Sep09) - 1.25ct ; Q110 (Jun09) - 1.25ct
  
• SPH : 2H09 (Aug) – Final 9ct ; Special 9ct ; 1H09 (Feb) - 7ct
  
• ComfortDelgro : Q209 (Jun) - 2.63ct
  
• SBSTransit : Q209 (Jun) – 4.5ct
  
• MIIF : 1H09 (Dec) – 1.5ct
  
• ST Engg : Q209 (Jun) - 3ct
  
• M1 : 1H09 (Jun) - Interim 6.2ct
  
• SPAus : Projected DPU = A8ct (FY10 - Year End Mar-10) ; 1-for-4 Rights @ A$0.78/S$0.86
  

SingTel - BT

Bharti gets nod from Bangladesh to buy Warid

It will purchase a 70% stake from owner Dhabi Group


A bid by Indian telecoms giant Bharti Airtel to purchase Bangladesh's fourth largest mobile phone operator Warid has been approved, regulators said yesterday.

Abu Dhabi-based Dhabi Group, which fully owns Warid Telecom, last month sought approval from the Bangladesh Telecommunications Regulatory Commission (BTRC) for the sale of a 70 per cent stake in Warid.

'The commission has given the go-ahead to transfer (Dhabi Group's) Warid telecom shares to Bharti Airtel,' the director general of BTRC, Ahsan Habib, told AFP yesterday.

The purchase makes Bharti the latest foreign company to make in-roads into the fast-growing Bangladesh mobile market.

'The commission has also approved investment of US$300 million by Bharti Airtel for the expansion of their telecommunication network across the country,' Mr Habib added.

Launched in May 2007, Warid had nearly three million subscribers - out of nearly 52 million overall - at the end of October 2009.

As the industry expands in Bangladesh, analysts predict that the number of mobile customers will pass 100 million by 2015, fuelled by a price war among the country's six operators.

In 2004, Egyptian Orascom took over Sheba and Singapore's state-owned SingTel bought a 45 per cent stake in Bangladesh Telecom in 2005.

Last year, Japan's NTT DoCoMo paid US$350 million to buy a 30 per cent stake in operator Aktel, majority owned by Malaysia's Axiata.

The move into Bangladesh by Bharti comes after its plan to ally with South Africa's MTN to create an emerging market telecom giant collapsed in September when Pretoria said that it feared that MTN might lose its 'national character'.

Analysts said that Bharti, which has more than 100 million subscribers in India, will need to expand abroad to increase revenues with earnings growth slowing in its home market, which has become crowded by new players. -- AFP

STEng - DBS

Back on the growth track


• Recent MRO contract wins in US point to aviation market recovery, as well as growing 3rd party
outsourcing
• Expect defence and infrastructure contract wins on the back of sustained government spending
• War chest of S$1.6bn points to potential acquisitions; 100% dividend payout likely again
• Maintain BUY, TP revised up to S$3.80


MRO outsourcing set to recover in the US. In Dec’09, STE announced a couple of significant MRO contract wins in the US worth about US$230m (including options), after a long dry spell of US-based contracts in the early part of FY09. We believe this could be the start of a recovery in the US aviation market and we could see more airlines willing to outsource their non-core functions to 3rd party MROs like STE. The ongoing recovery in the air cargo market should also fuel the demand for Passenger-to-Freighter (“PTF”) conversions, where STE has an established presence.

Government contracts will underpin revenue growth. Even after 2009’s impressive stimulus package, the Singapore government has indicated that spending will be stepped up in the 2010 budget – due to be announced just a month from now. STE is a key beneficiary of Government spending on defence, transport and infrastructure and we expect strong order flows to support revenue growth in 2010-11.

Maintain BUY, PE premium to STI not normalised yet. In line with the expected recovery, we revise up our EPS estimates slightly by 1-4% over FY09-11 and raise our TP to S$3.80 - pegged to 23x FY10 earnings. We expect STE to sustain its 100% dividend payout when it announces FY09 results next month, translating to a yield of 5.0% for FY10 and 5.4% in FY11. With over S$1.6b in gross cash following the US$500m bond issue in 2H-FY09, acquisitions are on the cards as well, which will spur its growth to a higher platform.

M1 - DBS

Capital management potential


• We expect at least 9% cash yield from capital management in addition to 7% dividend yield.
• Not much risk to stable FY10F earnings, despite higher competition, due to cost savings from
backhaul network.
• M1 has slightly underperformed STI by 1% since our downgrade on 22 Oct 09. Upgrade to BUY with revised TP of S$2.15 based on 13x FY10F (12x earlier)


We estimate S$160m-185m (DPS of 18-21 Scents) from potential capital management exercise. In the past, M1 has returned excess cash regularly to shareholders except for 2008 and 2009, when capex was
higher due to the construction of the backhaul network. M1 is past its peak capex in 2009 with the completion of the backhaul network. Our model suggests that M1 can easily pay out S$160m-S$185m to its shareholders, based on its free cash flow. Paying out S$160m in capital management would raise its net debt to EBITDA from 0.7x to 1.2x, still well below its target 1.5x-2.0x.

Would it be special dividends or capital reduction? M1 has done both in the past. We believe that options would be one-time special dividend, special dividends at regular intervals or capital reduction. In any case, we expect the share price to benefit from these actions. We believe that a capital management exercise could be announced with 1Q10F results.

Backhaul savings of S$10-15m helps to underpin stable FY10F earnings. We use 13x PER compared to 12x previously to account for capital management potential in FY10F. Based on 13x FY10F PER, our revised target price is S$2.15.

SingPost - DBS

Downgrade on valuation grounds


• Singpost’s CEO, Mr, Wilson Tan has stepped down to pursue other opportunities.
• With Dy CEO, Mr Ng Hin Lee taking care of Singpost in the interim, we don’t see any
discontinuity.
• The stock has done reasonably well in the last two months. Downgrade to HOLD for limited
upside.


The departing CEO has achieved what was expected of him. Mr. Wilson Tan joined Singpost in Oct 07 and was expected to focus on regionalization of Singpost’s business. In his 15 months tenure, he is credited with two good acquisitions, which have helped Singpost to expand its business in the region and monetize its intangible assets.

We don’t see any operational discontinuity. Singpost’s board would be actively pursuing the search for a new CEO, while CFO Mr Ng Hin Lee, who was promoted to Dy. CEO role last week, would take care of the company in the interim. We think that Singpost can continue to deliver as many of the strategic initiatives are already in place and execution should not be a problem with an experienced management team at each segment level.

Downgrade to HOLD on valuation grounds. Based on 6% yield (average historical yield), our target price remains unchanged at S$1.05, which translates to 13.5x FY10F PER, still at 10% discount to its average historical PER of 15x. We see potential upside of 3% with 6.5% dividend yield. The stock could be re-rated if (i) Singpost is able to grow its regional business through acquisitions further, or (ii) Singpost can monetize its HQ building.

StarHub - DBS

Expectations too high!


• We estimate an adverse impact of 5%/10% and 2%/3% on FY10F/11F earnings due to EPL loss
and expiry of job credit scheme respectively.
• Our FY10F/11F earnings are 8/11% below consensus
• We doubt if free cash flow can sustain 20 cents DPS in FY11F. Maintain FV with revised TP of
S$2.06


Why we differ? Contrary to the street’s expectations of EPL loss being EBITDA neutral, we estimate negative impact of at least S$17m/S$34m on FY10F/11F earnings. Our estimate of households leaving StarHub broadband is higher than street expectations. We estimate 14% of StarHub broadband subscribers may leave StarHub for SingTel and M1 within a year. Secondly, street may not have captured potential loss of mobile subscribers due to the “hubbing” proposition, which we think cannot be ignored. We estimate over 3% of post-paid mobile subscribers may leave StarHub in a year. We look forward to FY10F guidance from the incoming CEO Mr. Neil Montefiore on 4th Feb with 4Q09F results briefing.

Can free cash flow sustain 20 Scts DPS beyond 2010? Management has guided for annual 20 Scts DPS, which exceeds its est. FY09F EPS, as StarHub does not have to pay cash tax till late 2010. However beyond 2010, in our view, 20 Scts DPS could be sustained only by raising debt.

Our FY10F/11F earnings are 8%/11% below consensus. We are mindful of higher depreciating charges due to OpCo related capex in FY10F. We would value the company on 12x FY10F PER, at 10% discount to M1’s 13x target PER, due to (i) M1’s lower net debt to EBITDA of 0.7x compared to 1.0x for StarHub, and (ii) M1’s stable earnings prospects compared to declining earnings for StarHub.

SingPost - BT

SingPost looking for new group CEO


SINGAPORE Post Ltd (SingPost) is on the lookout for a new group chief executive officer (GCEO) as current GCEO Wilson Tan has resigned.

Mr Tan, who is leaving SingPost 'to pursue other opportunities', will also step down as director of the board. His last day at SingPost will be April 3.

Just last week, SingPost announced it was appointing its chief financial officer Ng Hin Lee as deputy group CEO. Mr Ng, who concurrently remains CFO, officially began his term as deputy group CEO yesterday.

If a suitable candidate is not selected by April 3, Mr Ng will assume the duties of group CEO until a replacement is found.

Mr Tan, who came on board in October 2007, has contributed towards SingPost's transformation as it diversified from a postal services provider to a mail, logistics and retail solutions provider in the region, SingPost said in an announcement to the Singapore Exchange (SGX) yesterday.

It was also under his helm that SingPost acquired Quantium Solutions International (formerly known as G3 Worldwide Aspac) and US-based Postea Inc, which is expected to bolster SingPost's regional growth and expansion.

Mr Tan said: 'It is gratifying to see SingPost develop from strength to strength and indeed to be part of its exciting transformational journey. The postal and logistics landscape has been evolving in tandem with changes in customers' lifestyles, and SingPost has been adapting and reinventing itself to stay relevant to its customers.'

SingPost chairman Lim Ho Kee added: 'On behalf of the board, I wish to register our appreciation to Wilson for his invaluable contributions and leadership, especially under the difficult and challenging environment of the past year.'

For the second quarter ended Sept 30, 2009, SingPost chalked up a net profit of $40.5 million, up 8.3 per cent from the previous corresponding quarter. Without the amortisation of deferred gain (which relates to the collaboration with Postea), the government's Job Credit Scheme and other one-off items, the group's underlying profit fell 8.6 per cent to $35.4 million.

Group revenue - which was strengthened by the consolidation of revenue from Quantium Solutions Group - increased 7.9 per cent to $130.3 million.

Happy New Year !