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Calling In to Check Up on SingTel’s Full Year Results

Singtel1Telecommunications company SingTel (SGX: Z74) posted a 12% decline in full-year profit from last year’s S$4.0b to S$3.51b in its annual earnings release. The company also saw a dip of 3.4% in its revenue for the year from S$18.2b a year ago to S$18.8b.

The broad picture for the top-line decline was due to lower revenue from SingTel’s Australian operations, part of which can be attributed to currency fluctuations between the Singapore and Australian dollar.

Profitability was hurt due to higher depreciation charges on existing assets (a 6% increase to S$2.13b), losses from exceptional items amounting to $40.1m and the acquisitions of digital businesses. SingTel had spent a total of S$697.9m on acquisitions for the year, bringing in companies like restaurant review portal HungryGoWhere (a familiar face for foodies in Singapore) and mobile advertising solutions provider Amobee, among others, into its corporate umbrella.

SingTel has been busy transforming itself by devoting energy to grow its digital presence while maintaining its existing core business. To that effect, the company has ear-marked more than S$2b to be spent over the next three years for acquisitions in the digital-space.

On the company’s transformation, its Chief Executive Officer, Ms Chua Sock Kong added, “Our transformation requires twin tracks of confident investments in new markets and digital business and a diligent focus on increasing profitability from our core business. This is a multi-year journey. We have set ourselves progressive milestones and are seeing encouraging signs in this set of results that our transformation strategy is on the right track”.

Regarding the next financial year, the company’s projecting stable revenues with single-digit growth in earnings before interest, taxes, depreciation & amortisation (EBITDA). SingTel has also set aside $2.5b to be spent on capital expenditures as the company expands its LTE coverage and 3G network enhancements – the company has been facing competition from Starhub (SGX: CC3), which is expected to provide island-wide LTE coverage by the end of 2013.

In news that will please existing shareholders and perk-up interest from income investors, SingTel has recommended a final dividend of S$0.10 per share, which would bring its full year payout to S$0.168 per share. That’s a 6.3% increase from last year’s dividends of S$0.158.

Shares of SingTel are currently trading at $4.01. Potential investors would be paying for 18 times earnings and get a dividend yield of 4.2% based on dividends of S$0.168 per share.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.