Singtel’s dividend misses targets, CEO sees ‘bright spots’ in FY2022

• Singtel (SGX: Z74) share price opens 2.4% lower on Thursday (27 May 2021)
• The group’s underlying net profit for the second half of FY2021 fell 22% year-on-year
• This was slightly higher than UOB and CIMB analysts’ earlier estimates
• Singtel’s final dividend per share for the year also came in below analysts’ expectations and FY2020’s payout
• Nevertheless, CEO Yuen Kuan Moon sees ‘bright spots’ in NCS and its data centre services business next year
• Buy and sell Singtel shares with an IG account

Singtel half-year profit falls 93% due to exceptional items

Singapore Telecommunications' (Singtel) underlying net profit for the second half of FY2021 came in slightly lower than analysts had predicted, falling by 22% year-on-year to S$896 million for the period.

UOB and CIMB analysts had expected underlying profit to contract to between S$900 million and S$1 billion.

Due to exceptional items of S$809 million for six months ended 31 March 2021, which the group had announced earlier, net profit fell 93% year-on-year to S$88 million from S$1.2 billion in the second half of FY2020.

Singtel shares opened 2.4% lower following the release of its financial results on Thursday.

The blue-chip counter has risen roughly 6% year to date. Analyst sentiments published by SGX StockFacts show a consensus rating of ‘outperform’ alongside a 12-month target price of S$2.95 on the stock.

The target price represents a 22.4% upside from Singtel’s last traded price of S$2.41.

Singtel FY2021 dividend misses analysts’ expectations

Across the full year, operating revenue for the full year was down 5% to S$15.64 billion.

EBITDA for the full year was S$3.83 billion, down 16%, while underlying net profit decreased 30% year-on-year to S$1.73 billion from S$2.46 billion.

Factoring in net exceptional charges of S$1.18 billion for the full year, net profit declined 49% to S$554 million. This included non-cash impairment charges for investments in Amobee and Trustwave, which the group also shared on 14 May.

The board has recommended a final ordinary dividend per share (DPS) of S$0.024. This brings the total ordinary DPS for the year to S$0.075, which is 39% lower than FY2020’s total DPS of S$0.1225.

Dividend yield at 3.1% (based on the latest stock price), also falls below analysts’ expectations of a dividend yield of 5% on a forecasted total DPS of S$0.115 for FY2021.

Nevertheless, FY2021’s total dividend payout amounts to approximately S$1.23 billion. This represents a payout ratio of 71% of underlying net profit.

What’s Singtel’s outlook for FY2022?

Mr Yuen Kuan Moon, Singtel Group CEO, said FY2021’s results are ‘disappointing’.

The resurgence of Covid-19 and tightened movement restrictions continue to weigh on regional economies, he added. Against this backdrop, the operating environment remains challenging for the telecoms sector, as companies confront structural changes and elevated capital investment cycles.

‘That said, NCS and our data centre services proved to be bright spots, showing strong growth as enterprises rushed to digitalise and transform their businesses. We will be capitalising on this mass digitalisation with plans for a strategic reset to drive recovery and growth,’ Mr. Yuen stated.

Singtel will also continue to maintain a strong balance sheet through a more active capital management programme.

The group expects dividends from the regional associates to be approximately S$1.3 billion and the group’s capital expenditure including 5G networks, to be around S$2.4 billion, comprising A$1.5 billion for Optus and S$800 million for the rest of the group.

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