OVERVIEW:
The counter is a leading communication group with significant presence in Singapore and Australia (Optus). It own stakes in regional mobile associates, namely Bharti Airtel (India, South Asia and Africa), Telkomsel (Indonesia), Advanced Info Service (Thailand) and Globe Telecom (the Philippines). The services range include fixed line, mobile, data, internet, TV, infocomm technology (ICT) and digital solutions.
HIGHLIGHTS:
(1) Latest quarter results saw underlying net profit up 1.6% year on year. Depreciation of regional currencies, especially AUD and Rupiah was major downside catalysts. In constant currency term, the net profit would have improve 4.6%.
(2) In Singapore, the consumer revenue rose 6%, driven by higher mobile data revenue and equipment sales. The enterprise revenue fell 3% because revenue from fibre rollout has been transferred to NetLink Trust.
(3) In Australia, the consumer revenue is flat in SGD term but up 13% in AUD term. Optus' 4G population coverage rose 4% quarter on quarter to 90% at end July, with the rollout of new 700MHz network. Other regional associates improved 8.6% in total year on year.
INVESTMENT THEMES:
(1) Among local peers, the counter shall be the least susceptible to potential entry of 4th telecommunication operator. It has expanded its business footprint into the regions. Overseas associates contributes > 60% of its EBITA in FY15.
(2) The counter has been shedding 15% from the peak at 4.4 since July. It represents dividend yield at 4.7%. Generally local research firms gave target price > 4.3 for it, so current price represents discount >10%. From the chart, price is residing near immediate support 3.65. Shall market sentiment overturn after General Election 2015 and US Federal meeting on coming week, recovery could be around the corner.
(3) From the historical P/E chart, the counter has fallen below average P/E.
ENTRY PRICE:
Accumulate now.
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