Singtel has reported full year FY2023 earnings of $2.23 billion, up 14% from the preceding year ended March 22. The company attributes the better showing to all-round growth of its businesses ranging from 5G mobile services, roaming revenue as well as stronger ICT contribution too.

 

Excluding unfavourable currency movements plus the absence of revenue from NBN migration and digital marketing unit Amobee which has been sold, operating revenue rose 5% to $14.62 billion from mobile and ICT services growth.

 

EBITDA and EBIT also increased 3% and 8% respectively, thanks to better margins with costs held down.

 

As a result, underlying net profit was 7% higher at S$2.05 billion, and would have risen 11% on a constant currency basis.

 

For second half ended March, earnings was up 6.1% y-o-y to $1.06 billion, while revenue was down 4.2% to $7.37 billion.

 

Singtel plans to pay a final ordinary dividend of 5.3 cents per share. Including the interim dividend of 4.6 cents per share, the total ordinary dividends would be 9.9 cents per share, representing a payout ratio of 80% of underlying net profit.

 

Together with the two-tranche dividend of 5.0 cents per share from its asset recycling initiatives announced during the half-year results, this brings total dividend for FY2023 to 14.9 cents, up 60%, giving a yield of 5.8%.

 

Singtel reiterates its commitment to pay ordinary dividends at between 60% and 80% of underlying net profit.

 

&ldquo Our solid financial performance in the second year of our strategic reset reflects the tangible progress we have made against our business priorities in spite of the uncertain macroeconomic environment,&rdquo says group CEO Yuen Kuan Moon.

 

&ldquo Our capital recycling programme continued to unlock value this year with more than S$2.8 billion raised largely from Airtel, allowing us to strengthen our balance sheet and deliver greater returns for shareholders,&rdquo he adds.

 

During the year, Singtel&rsquo s regional associates increased their pre-tax profit contributions by 10% to $2.27 billion despite generally unfavourable forex movements caused by the stronger Singdollar.

 

If forex was discounted, the improvement would have been 15%, with India&rsquo s Airtel driving a big part of the growth as its business recovers.

 

&ldquo Our regional associates have also benefitted from the rebound in mobile services post-COVID, and Airtel delivered yet another year of solid growth,&rdquo says Yuen.

 

Going forward, Singtel expects the healthy recovery to continue as economies reopen and international travel resumes.

 

&ldquo However, the group is mindful of the uncertain macroeconomic environment with elevated inflation and high interest rates.&rdquo

 

SINGTEL could be looking to better reflect the value of its infrastructure assets by carving them out as part of the latest reorganisation of its structure, analysts said.

 

They also highlighted potential cost savings with the merger of the company&rsquo s consumer and enterprise businesses under one entity.

 

Citi analyst Arthur Pineda said in a note on Thursday (Apr 27) that the reorganisation could be part of the company&rsquo s plan to drive value with its infrastructure assets, which typically trade at &ldquo far higher valuation multiples as compared to traditional telco services&rdquo .

 

As part of the organisational restructure, Singtel said it will form a Digital InfraCo unit, which will include the group&rsquo s regional data centre business, subsea cable and satellite carrier business, as well as its 5G multi-edge compute and cloud orchestration platform.

 

Bill Chang, chief executive officer (CEO) of group enterprise, will relinquish his portfolio to lead the new unit from Jun 1.

 

&ldquo We believe the move to carve out an entity for these assets would be the first step towards eventual monetisation exercises via the taking of a strategic partner or via an initial public offering route to better reflect the value of the assets,&rdquo Pineda said.

 

Similarly, DBS analyst Sachin Mittal said forming a separate entity should allow strategic investors to invest in the assets that they are interested in.

 

He noted that the move comes after NCS, which provides information and communications technology services, was carved out separately in 2021, leaving connectivity services behind in the group enterprise business.

 

&ldquo Singtel could seek to capitalise on this monetisation potential, given the potential to fetch high valuations.

 

&ldquo For instance, data centres in Singapore alone could command a valuation of 20 to 25 times enterprise value to earnings before interest, taxes, depreciation and amortisation (estimated at S$3.2 billion) and divesting one-third could fetch more than S$1 billion, or S$0.06 per share, in cash,&rdquo he said.

 

Mittal noted that Singtel&rsquo s current market cap of S$42 billion is lower than the market value of its associates, which stands at S$45 billion.

 

This implies a negative value of the core business in Singapore and Australia, he said, adding that the InfraCo formation will help investors &ldquo crystallise the value&rdquo of the telco&rsquo s core business.

 

In addition, he said Singtel&rsquo s consolidation of its Singapore consumer and enterprise businesses into a single company could lead to &ldquo significant cost savings&rdquo , although it is unclear to what extent the savings could be at this stage.

 

Citi&rsquo s Pineda also said the move should generate some degree of operational and financial synergies in areas such as manpower and selling, general and administrative expenses.

 

&ldquo We do note that the move to integrate consumer and enterprise services in Singapore mirrors its recent moves to do the same in Australia in mid-2022,&rdquo he said.

 

As part of the consolidation, consumer business CEO Anna Yip and enterprise business managing director Lim Seng Kong will both report to former Hewlett Packard executive Ng Tian Chong from Jun 1.

SINGTEL : Z74 +2.01% announced on Thursday (Apr 27) that it will be combining its consumer and enterprise businesses in Singapore into a singular operating company from Jun 1, 2023.

 

The move is part of a &ldquo strategic reset and ongoing efforts to restructure and reposition the company for growth&rdquo .

 

The company also announced plans to form a standalone infrastructure unit, dubbed Digital InfraCo, which will include the group&rsquo s regional data centre business, subsea cable, satellite carrier businesses and Paragon platform.

 

Ng Tian Chong, who was most recently senior vice-president and managing director of Greater Asia at HP, will join Singtel to head up the newly combined operating company with effect from Jun 1, 2023, the telco said.

 

It added that Bill Chang, who is chief executive of group enterprise at Singtel, will relinquish his enterprise business portfolio to helm Digital InfraCo from Jun 1, 2023.

 

&ldquo This consolidation of our consumer and enterprise units in Singapore is designed to empower our core business to optimise synergies and capabilities to drive growth,&rdquo said Singtel group chief executive Yuen Kuan Moon.

 

&ldquo With a more unified approach, we would be more agile, competitive and compelling when bringing solutions to market.&rdquo

 

Establishing the infrastructure unit, meanwhile, will allow Singtel to turn its digital infrastructure assets into an area of growth, Yuen added.