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SingTel Bumps Up Full-Year Profits

Singapore Telecommunications (SGX: Z74), or more commonly known as SingTel, is one of the largest telecommunication companies in Asia. It has interests in telecommunication operators in more than 25 countries – though its main focus is on Singapore and Australia – and is majority-owned by Temasek Holdings, one of the investment arms of Singapore’s government.

Just yesterday, the telecommunications outfit had just released its full-year results for the financial year ended 31 March 2014 (FY2014).

Operating highlights

Its operating revenue for the full year dropped 7.3% year-on-year to S$16.8 billion. This was mainly due to two factors: 1) unfavourable currency fluctuations with almost all major currencies that SingTel’s exposed to having depreciated against the Singapore dollar during the year; and 2) lower revenue from Australia.

Singtel ended the year with a stable underlying net profit of S$3.6 billion, which was essentially unchanged from the previous year. However, due to some extraordinary losses that occurred in FY2013 that brought net profits down in that year, SingTel’s net profit managed to improve by 4.1% to S$3.65 billion in FY2014.

The company had proposed a final dividend payout of S$0.10 per share, bringing the full year dividend to S$0.168. The pay-out translates into a pay-out ratio of 74% and is in line with management’s policy of giving out between 60% and 75% of each year’s profit as dividends. The annual dividend for FY2014 is also unchanged from the previous year’s dividend.

Singtel segments its operations into 3 main sectors: Group Consumer; Group Enterprise; and Group Digital Life. The first sector, Group Consumer, was relatively stable for the year, and showed a slight improvement in EBITDA (earnings before interest, taxes, depreciation, and amortization) as it grew 0.4% to S$3.35 billion. The Group Enterprise segment meanwhile  had suffered slightly as its EBITDA dropped by 1.5% to S$2.03 billion. Lastly, SingTel’s Group Digital Life segment saw a much larger revenue base (a jump of 52%) but continued to record a negative EBITDA due to higher start-up losses and higher operational costs.

There was a decline of 10% in free cash flow that was produced by SingTel during the year, but it’s still a huge amount at S$3.4 billion; higher costs from the company’s Australian operations and larger working capital needs had dinged SingTel’s free cash flow.

On the balance sheet front,  things are stable with SingTel ending the year with a leverage ratio (Total Asset/ Total Equity) of 1.65, a slight improvement from the ratio of 1.67 clocked 12 months ago.

Foolish Summary

With its closing share price of S$3.84 yesterday, SingTel’s offering a historical dividend yield of 4.4% based on its latest annual dividend. Shares of the telco operator are also valued at 16.8 times trailing earnings.

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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 Stanley Lim doesn’t own shares in any companies mentioned.