SingTel Earnings: Optus Outage to Have a Negative Impact on Customer Churn; We Lowered Our Valuation

We reduced our fair value estimate for Singapore Telecommunications, or SingTel, to SGD 2.40 from SGD 2.52, following the release of a first-half result where revenue was slightly lower than our expectations, but net profit was above. More important, we factor in some negative impact on Optus following the outage on Nov. 8, which is the main driver of our downgraded fair value estimate. The stock looks fairly valued at these levels. SingTel’s first-half, fiscal 2024 operating revenue declined 3% year on year, with EBITDA down 5% year on year and underlying net profit up 12%. Assuming constant currencies, SingTel’s first-half revenue would have been up 2%, EBITDA down 1%, and net profit up 16%. Notably, this strong underlying net profit growth was mainly on the back of reductions in depreciation and net interest expense. Net interest expense fell because of an improved balance sheet following asset divestitures.